nep-sea New Economics Papers
on South East Asia
Issue of 2007‒07‒20
nine papers chosen by
Kavita Iyengar
Asian Development Bank

  1. In the Same Boat: Exchange Rate Interdependence in the Asia-Pacific Region By Tomer Shachmurove; Yochanan Shachmurove
  2. The Long Term Fate of Korea and Other “Small” Economies in East Asia: Economic Development, Integration Issues, and Political Power By Sanidas, Elias
  3. Commercial Power of Asia By Oehler-Sincai, Iulia Monica
  4. Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets By Schnabl, Gunther; Hoffmann, Andreas
  5. An initial push for successful transition from import substitution to export-orientation in Taiwan and China: The FDI-led hypothesis By Jayanthakumaran, Kankesu and Lee, Shao-Wei
  6. Rules of origin and the web of East Asian free trade agreements By Manchin, Miriam; Pelkmans-Balaoing, Annette O.
  7. Child Mortality In China And Vietnam In A Comparative Perspective By Alberto, Gabriele; Francesco, Schettino
  8. The Impact of Large Firms in Promoting Economic Growth, Exports and Regional Integration: A Chandlerian Perspective with Emphasis on East Asia By Sanidas, Elias
  9. Prospect Theory and Reference Point Adaptation: Evidence from the US, China, and Korea By Arkes, Hal; Hirshleifer, David; Danling, Jiang; Sonya, Lim

  1. By: Tomer Shachmurove (Social Science Computing Center, University of Pennsylvania); Yochanan Shachmurove (Department of Economics, University of Pennsylvania and The City College of The City University of New York)
    Abstract: This paper utilizes Vector Auto Regression (VAR) models to analyze the interdependence among exchange rates of twelve Asian-Pacific nations, Australia, China, Indonesia, Japan, Malaysia, New Zealand, Philippines, South Korea, Singapore, Taiwan, Thailand, and Vietnam. The daily data span from 1995 to 2004. It finds strong regional foreign exchange dependency, varying from 32 to 73 percent. This network of markets is highly correlated, with shocks to one reverberating throughout the region. Despite the linkages of the Chinese exchange rate to the United States dollar, the Chinese foreign exchange is not as independent with respect to its South-Asian neighbors as previously thought.
    Keywords: : Exchange rates, Asian- Pacific region, Australia, China, Indonesia, Japan, Malaysia, New Zealand, Philippines, South Korea, Singapore, Taiwan, Thailand, Vietnam, Correlograms, Impulse Responses, Variance Decompositions, Interdependence
    JEL: F0 F3 G0 C3 C5 E4 P0
    Date: 2007–07–01
  2. By: Sanidas, Elias (University of Wollongong)
    Abstract: In this paper it is argued that Korea and other countries in East Asia like Korea have a particular fate quite predictable in the long run in terms of economic growth and political dependency unless economic integration takes place in a particular direction. Thus the presence of the potentially giant China makes things “difficult” for “Korean” countries (e.g Thailand, Malaysia, Vietnam, and even Japan). This fate is not coloured with optimism unless some measures are taken that ensure a particular way of integration in East Asia. It is not unique that a giant economy is the centre of economic activities for the wider region. Unlike the European Union which does not contain any giant member in its process of integration, the USA could be the closest good example of how neighbouring countries have evolved next to this giant. In East Asia the situation is not similar to that of the USA at the moment, but in this paper there is a set of propositions and arguments that predict the fate of “Korean” economies next to a potentially giant China. Several methods will be used to demonstrate the validity of these propositions (mathematical model, cluster and scale analyses, and so on). Various strategies will be examined in the context of the propositions. It will be demonstrated that the short term and long term strategies that countries such as Korea and Thailand in isolation might have to follow are not necessarily consistent unless an overall strategy of regional integration takes place.
    Keywords: long term integration; fusion; exports; policies
    Date: 2006
  3. By: Oehler-Sincai, Iulia Monica
    Abstract: The present paper, based on a detailed analysis of the main statistical foreign trade indicators of the emerging economies of the Eastern and South-Eastern Asia, outlines a series of characteristics of the foreign trade flows of the analyzed economies from the ’50 up to the present. The accent is set on the period 1995-2006, which emphasizes two moments of crisis of the Asian trade: 1997-1998 and 2001. At the level of the analyzed economies, it can be remarked a tendency of continuous growth of the share of the intra-regional trade flows in the total trade flows, mainly due to their participation in regional trade agreements, to the strengthening of the regional production networks, to the role of China as engine of economic growth in the whole region and even at global level. On product category, the manufactures have the greatest share in the merchandise exports of the Asian emerging economies (especially office and telecom equipment, integrated circuits, automotive products, textiles and clothing, etc.). While China surpassed the share of the Asian tigers of the first generation in the world trade in 2001 and that of Japan in 2004, the scenario presented in this paper indicates the surpass in 2007 of the share of Germany (second place in the world trade in 2005), the surpass of the share of the Asian tigers of the first generation in 2009, and the surpass of the share of the group of the 8 Asian tigers and that of the USA as well in 2012. In the following decades, China might become the strongest world economy at the global level, but only if the sustainable development and the eradication of the social inequities will become de facto priorities of the Chinese officials. The actual negative externalities (costs) of the Chinese economic growth, transferred on the environment and the society, will be object to another analysis.
    Keywords: economii emergente; tigri asiatici; fluxuri comerciale; balanţă comercială; balanţă comercială normalizată; grad de acoperire a importurilor prin exporturi; deschidere economică; înclinaţie spre export; indicele Grubel-Lloyd; delocalizare / relocalizare a capacităţilor productive; comerţ interregional; comerţ intraregional; avantaj comparativ; competitivitate industrială; investiţii străine directe (ISD); fluxuri de capital; criză financiară; depreciere valutară
    JEL: F10 F13 F14 F15
    Date: 2007–03
  4. By: Schnabl, Gunther; Hoffmann, Andreas
    Abstract: We show how since the mid 1980s expansionary monetary policies in the large economies and “vagabonding liquidity” have contributed to bubbles in the new and emerging markets. Based on the monetary overinvestment theories of Hayek and Wicksell we describe a wave of bubbles and crises that was initiated in Japan by an expansionary monetary policy in the mid 1980s. After the burst of the Japanese bubble and sharply declining interest rates in Japan, carry trade transmitted the bubbles to East Asia (Asian crisis) and the new markets in the developed economies. After the end of the irrational exuberance in the new markets, new bubbles emerged in the US real estate market and possibly currently in China and Central and Eastern Europe. Because particularly Japan and the US have tended to lower interest rates in response to financial crisis, the low interest rate policies in the large countries and thereby speculative exaggerations may continue. According to Wicksell and Hayek a higher level of interest rates in the large countries would reveal the structural distortions that have come along with the ample liquidity supply.
    Keywords: Bubbles; Boom-bust cycles; Capital Flows; Emerging Markets; Hayek; Wicksell.
    JEL: E52 E44 B53 E32
    Date: 2007–04–05
  5. By: Jayanthakumaran, Kankesu and Lee, Shao-Wei (University of Wollongong)
    Abstract: This paper examines the association between government policy interventions, Foreign Direct Investment (FDI) and exports in Taiwan and China by applying the LP (Lumsdaine and Papell, 1997), approach allowing two endogenous structural breaks. This paper further explores the cointegrating relationship between FDI and exports in Taiwan by using the Johansen and Juselius (1990) approach and causal relationships between FDI and exports in both Taiwan and China by using the Granger causality tests respectively. We found that significant trend breaks in the FDI and export time series detected in both countries coincided with extensive government interventions, mainly in the form of Export Processing Zones (EPZ), encouraging FDI during a transition period from import substitution to export orientation. The results emerging from our research indicate no long-run cointegrating relationship in Taiwan and one-way causal relationship flows from exports to FDI in China and FDI to exports in Taiwan. The growing fear is that the World Trade Organisation’s (WTO) involvement in deregulating EPZs may narrow the differences between the zones and the rest of the economy and prevent new firms from entering the zones. The EPZs may no longer be the transitional strategy for poor/developing countries.
    Keywords: FDI, Exports, EPZ, structural breaks, causality, East Asia
    JEL: C22 F21 R58
    Date: 2007
  6. By: Manchin, Miriam; Pelkmans-Balaoing, Annette O.
    Abstract: The authors provide an overview of the preferential rules of origin in East Asia, highlighting the aspects that might possibly generate some trade-chilling effects. They review characteristics of existing preferential trade agreements with special emphasis on lessons from the European experience, and analyze some important features of the existing rules of origin in East and South-East Asian regional integration agreements. The empirical analysis of the effectiveness of preferentialism on intra-regional trade flows focuses on the ASEAN Free Trade Area (AFTA), with the aim of providing a rough estimate of the costs of requesting preferences. The results suggest that preferential tariffs favorably affect intra-regional imports only at very high margins (around 25 percentage points). This points to the likelihood of high administrative costs attached to the exploitation of preferences, particularly with regard to the compliance with AFTA ' s rules of origin.
    Keywords: Free Trade,Trade Law,Rules of Origin,Trade Policy,Economic Theory & Research
    Date: 2007–07–01
  7. By: Alberto, Gabriele; Francesco, Schettino
    Abstract: This paper analyzes China’s and Vietnam’s performance in reducing under-five child mortality in a comparative perspective. Under the market socialist model, both countries achieved very high rates of GDP growth, but income distribution and the provision of key public services deteriorated. As a result, child mortality reduction in China and Vietnam was only partially satisfactory. However, although the former grew faster and is more economically developed, Vietnam’s record in this area was markedly better than China’s. We show that this apparent paradox is due mainly to two reasons. One is related to the relative status of women, which is better in Vietnam than in China. The other stems from the fact that the perverse side-effects of market-oriented reforms (such as worsening income distribution and degradation of essential public services) have reached a more advanced and alarming stage in China than in Vietnam.
    Keywords: Child Mortality; China; Vietnam; Socialist Market; Cross Country analysis
    JEL: I12 P21 I38 O21
    Date: 2006–07
  8. By: Sanidas, Elias (University of Wollongong)
    Abstract: Chandler’s work is well known. He has amply demonstrated that large firms played a huge role in the economic take-off and development of countries such as Germany and especially the USA. In this paper his thesis is extended to the whole world, by considering various countries, economically integrated regions, their exports and economic achievement. The largest firms in the world are examined in this context. Chandler’s thesis is thus confirmed with this analysis and some quantitative evidence is provided in that respect. In particular, Korea’s position is quite strong in the region of East Asia following Japan’s leadership. This paper also demonstrates that SMEs role in economic development without the presence of large firms would be rather limited. Last but not least, integration seems to take place even without the existence of formal agreements due to the presence of large firms.
    Keywords: Largest 2000 firms; national exports; Chandler; regression
    Date: 2006
  9. By: Arkes, Hal; Hirshleifer, David; Danling, Jiang; Sonya, Lim
    Abstract: We examined prospect theory and reference point adaptation following gains or losses using participants from China, Korea, and the US. Supporting prospect theory, we found in Studies 1 and 2 that subjects from all three countries generally exhibited loss aversion and a greater propensity for risk seeking in the loss domain than in the gain domain. In Study 3 we used the Becker, DeGroot, and Marschak (1964) procedure to ascertain the valuation subjects placed on a gamble after either a prior gain or a prior loss on a stock. After inferring the shift in each subject’s reference point following this prior gain or loss, we found that reference point adaptation following a gain exceeded that following a loss in all three countries. In our third study we also had subjects sell and then immediately repurchase a stock that had experienced a prior gain or loss, which was designed to “punctuate” or close the mental account containing the prior gain or loss. This manipulation caused an increase in reference point adaptation among the Americans but a decrease among the Asians.
    Keywords: prospect theory; cross-cultural differences; reference point adaptation; mental accounting
    JEL: D81 G11
    Date: 2007–07–09

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