nep-sea New Economics Papers
on South East Asia
Issue of 2007‒06‒18
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Estimation of Asian effective exchange rates: a technical note By San Sau Fung; Marc Klau; Guonan Ma; Robert N. McCauley
  2. International Specialization of Major Trading Countries in Global Trade of Sports Goods By Madeleine Andreff; Wladimir Andreff
  3. Capitalism and Democracy in 2040: Forecasts and Speculations By Robert W. Fogel
  4. Business Groups and the Big Push: Meiji Japan's Mass Privatization and Subsequent Growth By Randall Morck; Masao Nakamura
  5. About urban mega regions : knowns and unknowns By Yusuf, Shahid
  6. Foreign direct investment in Vietnam: An overview and analysis the determinants of spatial distribution across provinces By Nguyen, Ngoc Anh; Nguyen, Thang
  7. Extreme risk in Asian equity markets By Cotter, John
  8. Revealed Comparative Advantage and Specialization in Athletics By Cindy Du Bois; Bruno Heyndels
  9. Using Household Panel Data to Understand the Intergenerational Transmission of Poverty By Stephen P. Jenkins; Thomas Siedler
  10. Lognormal Approximation of Complex Path-dependent Pension Scheme Payoffs By Jørgensen, Peter Løchte
  11. Devaluations, output and the balance sheet effect: a structural econometric analysis By Camilo E Tovar
  12. Financial globalisation, governance and the evolution of the home bias By Bong-Chan Kho; René M Stulz; Francis E Warnock
  13. Economic Effects of a Korea-U.S. Free Trade Agreement By Kozo Kiyota; Robert M. Stern

  1. By: San Sau Fung; Marc Klau; Guonan Ma; Robert N. McCauley
    Abstract: Discussion of exchange rate policy in Asia would benefit from appropriate measures of exchange rates on a multilateral basis. The purpose of this paper is to refine the construction of the effective exchange rates (EERs) for Asian economies, to make allowances for the role of Hong Kong SAR as an entrepôt and to reflect the fast-growing intra-regional trade. For the scenarios under consideration, it turns out that adjusting for re-export trade through Hong Kong SAR is generally more important in the determination of trade weights than updating the base year. The proposed refinements have important policy implications, particularly in estimating the relative sizes of currency blocs, should the region's exchange rate policies become more oriented to trade baskets than to bilateral dollar rates.
    Keywords: effective exchange rates, intra-regional trade
    JEL: F10 F31
    Date: 2006–10
  2. By: Madeleine Andreff (University Marne-la-Vallée); Wladimir Andreff (University Paris 1 Panthéon Sorbonne)
    Abstract: The analysis of international trade in sports goods is still in its infancy. Only four articles dealing with the topic have appeared in economic literature so far. In order to alleviate the sports economists ignorance about international specialisation in sports goods trade, we started to build up an entirely new dataset based on extracting data available in Comtrade (the UN word trade data basis) at the most disaggregated level (6 digits). After resolving a number of classification and statistical tricks, we have built up a country and sports goods dataset (41 countries, 36 goods), which gathers 94-96% of sports goods global trade every sampled year (1994, 1997, 1999, 2002 and 2004). Our country sample is divided into five regional areas of the world economy: NAFTA, EU + Switzerland, Eastern Europe, Asia, other emerging countries. As a first step, our dataset enables us to precisely describe the major flows of sports goods global trade. Major trading areas are Asia, Europe and NAFTA while major exporters are China, Hong Kong, the US and France, and major importers are the US, Japan, Germany, France, the UK and Italy. A major market share in sports goods global trade is for sportswear, anoraks, and gymnastic equipment. Asia, Eastern Europe and emerging countries have an excess balance in sports goods trade whereas NAFTA and Europe are in deficit. Different assessments, including one of revealed comparative advantages and disadvantages and a competitiveness index, depict the following international specialisation: NAFTA and Europe are specialised in ‘equipment intensive’ sports goods whereas Asia, Eastern Europe and emerging countries are specialised in ‘trite’ sports goods and some less equipment intensive sports goods. NAFTA is competitive in not any sport good, Europe is competitive in skis, emerging countries and Eastern Europe in sportswear and anoraks, and Asia in sportswear, anoraks, rackets, balls, skates, and gymnastic equipment. A principal component analysis often groups ‘trite’ sports goods together as opposed to intensive-equipment sports goods in global trade. A hierarchical ascendant classification methodology shows that China is a quite specific (dominant) trade partner in the global market for sports goods trade, Indonesia and Pakistan are platform for (Nike’s) outward-processing trade, international specialisation differentiates countries where sports goods production was relocated from trade partners with big domestic markets for sports goods. \
    Keywords: sports economics, sports goods, international trade, international specialisation, globalisation, comparative advantage, competitiveness
    JEL: L83 Z19 F01 F14
    Date: 2007–06
  3. By: Robert W. Fogel
    Abstract: While the economies of the fifteen countries that were in the European Union (EU15) in 2000 will continue to grow from now until 2040, they will not be able to match the surges in growth that will occur in South and East Asia. In 2040, the Chinese economy will reach $123 trillion, or nearly three times the output of the entire globe in the year 2000, despite the influence of several potential political and economic constraints. India's economy will also continue to grow, although significant constraints (both political and economic) will keep it from reaching China's levels. The projected decline of the EU15's global share of GDP means that Asia will be poised to take up the role of promoting liberal democracy across the globe.
    JEL: F47
    Date: 2007–06
  4. By: Randall Morck; Masao Nakamura
    Abstract: Rosenstein-Rodan (1943) and others posit that rapid development requires a 'big push' - the coordinated rapid growth of diverse complementary industries, and suggests a role for government in providing such coordination. We argue that Japan's zaibatsu, or pyramidal business groups, provided this coordination after the Meiji government failed at the task. We propose that pyramidal business groups are private sector mechanisms for coordinating and financing 'big push' growth, and that unique historical circumstances aided their success in prewar Japan. Specifically, Japan uniquely marginalized its feudal elite; withdrew its hand with a propitious mass privatization that rallied the private sector; marginalized an otherwise entrenched first generation of wealthy industrialists; and remained open to foreign trade and capital.
    JEL: G3 L23 L25 N15 N25 O14 O16 O19 O2 O21 O25 O38 O53 P1 P11 P12
    Date: 2007–06
  5. By: Yusuf, Shahid
    Abstract: Mega urban regions are not a passing phenomenon. They are likely to persist and to enlarge their economic footprints because they benefit from the advantages of market scale, agglomeration economies, location, and the increasing concentration of talented workers. Metropolitan regions which are polycentric, relatively well managed, and have invested heavily in transport infrastructure are able to contain some of the problems attendant upon a concentration of people and industry. Moreover, with energy and water resources becoming relatively scarce and many countries anxious to pre serve arable land for farming, the economic advantages of densely populated urban areas are on the rise because they have a lower resource utilization quotient. During the next 15 years, mega urban economies could coalesce in three Southeast Asian locations: Bangkok, Jakarta, and the Singapore-Iskander Development Region (IDR, South Johor). The Bangkok and Jakarta (Jabotabek) metropolitan regions have passed the threshold at least in terms of population size but they have yet to approach the industrial diversity, dynamism, and growth rates of a Shanghai or a Shenzhen-Hong Kong region. Singapore, if coupled with IDR, has the potential but it is still far from being an integrated urban region. This paper examines the gains from closer economic integration and the issues to be settled before it could occur. The paper notes that a tightening of localized economic links between two sovereign nations through the formation of an urban region would involve a readiness to make long-term political commitments based on a widely perceived sense of substantial spillovers and equitably shared benefits. Delineating these benefits convincingly will be essential to winning political support and a precondition for a successful economic flowering.
    Keywords: Transport Economics Policy & Planning,ICT Policy and Strategies,Population Policies,Tertiary Education,Agricultural Knowledge & Information Systems
    Date: 2007–06–01
  6. By: Nguyen, Ngoc Anh; Nguyen, Thang
    Abstract: Vietnam has been quite sucessful in attracting FDI inflows since the inception of economic reform in 1986. The inflow of FDI has contributed significantly to the economic development of Vietnam. Still, the determinants of FDI inflow and its impacts on the economy of Vietnam are under-researched. In this paper we provide an overview of foreign direct investment (FDI) in Vietnam and attempt to review of the current status of economic research on the determinants of FDI and its impacts on the economy of Vietnam. Our regression analysis of the determinants of FDI spatial distribution across provinces points to the importance of market, labour and infrastructure in attracting FDI. Government policy as measured by the Provincial Competiveness Index (PCI), however, does not seem to be a significant factor at the provincial level. Foreign investors from differenct source countries seem to behave differently in chosing the location of investment.
    Keywords: Foreign Direct Investment; Vietnam; multinationals; spatial distribution;
    JEL: F23 F2
    Date: 2007–06–10
  7. By: Cotter, John
    Abstract: Extreme price movements associated with tail returns are catastrophic for all investors and it is necessary to make accurate predictions of the severity of these events. Choosing a time frame associated with large financial booms and crises this paper investigates the tail behaviour of Asian equity market returns and quantifies two risk measures, quantiles and average losses, along with their associated average waiting periods. Extreme value theory using the Peaks over Threshold method generates the risk measures where tail returns are modelled with a fat-tailed Generalised Pareto Distribution. We find that lower tail risk measures are more severe than upper tail realisations at the lowest probability levels. Moreover, the Kuala Lumpar Composite exhibits the largest risk measures.
    JEL: G15 G1
    Date: 2007
  8. By: Cindy Du Bois (Vrije Universiteit Brussel); Bruno Heyndels (Vrije Universiteit Brussel)
    Abstract: Using entries in the 2005 IAAF rankings as a measure of a country’s success in athletics, we analyse intercountry differences in athletic specialisation (measured through an index for revealed symmetric comparative advantage). A Tobit II model identifies macro-economic, sociological and political conditions that shape patterns of specialisation. We observe geographical patterns: African and Carribean (and to a lesser extent Asian) countries have a ‘typical’ pattern of specialisation. Highly populated as well as richer countries diversify more. Larger countries specialise in sprinting and middle distance running while leading to comparative disadvantages in non-running events. Finally, (former) socialist countries have a significant revealed comparative advantage in non-running events and a disadvantage in sprinting.
    Keywords: athletics, revealed comparative advantage, specialisation
    JEL: L83
    Date: 2007–06
  9. By: Stephen P. Jenkins; Thomas Siedler
    Abstract: This paper discusses how household panel surveys can be informative about the intergenerational transmission of poverty. We consider issues both of data and of the statistical methods that may be applied to those data. Although the data focus is on panel surveys from developed countries, we also briefly consider data availability in developing countries. We set out a list of survey data requirements for intergenerational analysis, and then discuss how the main household panel surveys in developed countries meet the criteria. In order to highlight the advantages and disadvantages of household panel surveys, the section also compares them with other types of longitudinal studies. Next, we review the estimation methods that have been used to examine the intergenerational transmission of poverty when using household panel surveys. Finally, we provide three examples of household panel surveys in developing countries (Indonesia, Malaysia and Mexico) that meet the data requirements for analysis of the intergenerational transmission of poverty.
    Keywords: Demographic change, Consumption structure, Consumption of the elderly
    Date: 2007
  10. By: Jørgensen, Peter Løchte (Department of Business Studies, Aarhus School of Business)
    Abstract: This paper analyzes an explicit return smoothing mechanism which has recently been <p> introduced as part of a new type of pension savings contract that has been offered by Danish life insurers. We establish the payoff function implied by the return smoothing mechanism and show that its probabilistic properties are accurately approximated by a suitably adapted lognormal distribution. The quality of the lognormal approximation is explored via a range of simulation based numerical experiments, and we point to several other potential practical applications of the paper’s theoretical results.
    Keywords: Account-based pension schemes; return smoothing; payoff distributions; density approximation; Monte Carlo simulation; Asian options
    Date: 2006–11–21
  11. By: Camilo E Tovar
    Abstract: This paper estimates a new open economy macroeconomic model for South Korea to determine the output effect of currency devaluations. Three transmission mechanisms are considered: the expenditure-switching, the balance sheet, and a monetary channel associated to a nominal exchange rate target. Devaluations are defined as an increase in this target. This allows to isolate the effects of an explicit exogenous devaluationary policy shock. Ceteris paribus, a devaluation is found to be expansionary. Output contractions in South Korea should then be associated with a different shock such as an adverse shock on the international interest rate or on export demand.
    Keywords: structural estimation, DSGE, financial accelerator, devaluations, balance sheet effect, interest rate rule, exchange rate target, new open economy macroeconomics
    JEL: F31 F41
    Date: 2006–09
  12. By: Bong-Chan Kho; René M Stulz; Francis E Warnock
    Abstract: Despite the disappearance of formal barriers to international investment across countries, we find that the average home bias of US investors towards the 46 countries with the largest equity markets did not fall from 1994 to 2004 when countries are equally weighted but fell when countries are weighted by market capitalisation. This evidence is inconsistent with portfolio theory explanations of the home bias, but is consistent with what we call the optimal insider ownership theory of the home bias. Since foreign investors can only own shares not held by insiders, there will be a large home bias towards countries in which insiders own large stakes in corporations. Consequently, for the home bias to fall substantially, insider ownership has to fall in countries where it is high. Poor governance leads to concentrated insider ownership, so that governance improvements make it possible for corporate ownership to become more dispersed and for the home bias to fall. We find that the home bias of US investors decreased the most towards countries in which the ownership by corporate insiders is low and countries in which ownership by corporate insiders fell. Using firm-level data for Korea, we find that portfolio equity investment by foreign investors in Korean firms is inversely related to insider ownership and that the firms that attract the most foreign portfolio equity investment are large firms with dispersed ownership.
    Keywords: financial globalisation, home bias, corporate governance
    JEL: F36 G34
    Date: 2006–12
  13. By: Kozo Kiyota; Robert M. Stern (Research Seminar in International Economics, University of Michigan)
    Abstract: This study presents an analysis of the bilateral free trade agreement (FTA) that is being negotiated between Korea and the United States. The bilateral FTA negotiations were notified to the U.S. Congress by the United States Trade Representative in February 2006, and formal negotiations began in May 2006.1 It is anticipated that the negotiations may be completed and the agreement signed before mid-2007, which is when the current U.S. presidential negotiating authority expires. Once signed, the implementing legislation can be introduced in the U.S. Congress at any time. In Chapter 1, we set out what appear to be the primary objectives of the United States and Korea in their pursuit of an FTA. In Chapter 2, we review the existing studies of a Korea-U.S. FTA that have been done to date. Chapter 3 is devoted to comparative static and dynamic analyses of the FTA. We first provide an overview of the features and benchmark data of the Michigan Model of World Production and Trade, which is the computational general equilibrium (CGE) modeling framework that we use to analyze the economic effects of a Korea-U.S. FTA. Thereafter, we present the comparative static modeling results for the bilateral removal of tariffs and other trade barriers for agricultural products, manufactures, services, and all of these combined. This is followed by presentation of results of some dynamic computational scenarios that are specially constructed to take into account possible changes in capital formation that may be generated by the Korea-U.S. FTA. We then draw together the main conclusions from the review of previous studies and our own computational work. In Chapter 4, we provide a broader perspective on a Korea-U.S. FTA that takes into account alternative negotiating options for the two nations. These options include computational analyses of the other FTAs that each nation has concluded in recent years and that are currently in process. We also calculate the potential effects of the unilateral removal of trade barriers by the United States and Korea and the effects of global free trade in which all countries or regions covered in the model are assumed to remove their existing trade barriers on a multilateral basis. In Chapter 5, we present conclusions and implications for further research and policy.
    Keywords: Free trade, Korea (South), Commercial treaties
    JEL: F13
    Date: 2007–04

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