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on South East Asia |
| By: | J L Ford; Bagus Santoso; N J Horsewood |
| Abstract: | This paper examines the extent to which the Asian currency crises can be accounted for by the macroeconomic fundamentals suggested by first and second generation models, exclusive of the ideas of the third generation models. In doing so we extend the literature on the earlier models by using GARCH and Path Independent Markov-Switching GARCH models to explain the market pressure on the exchange rate, and the probability of the timing of a crisis. In addition, we account for appreciations of the exchange rate. Our empirical estimates for Indonesia, South Korea, Malaysia and Thailand confirm that macroeconomic variables can explain the crises and the probability of occurrence at any time, dominating the conventionally used logit model. |
| Keywords: | Currency crisis, macroeconomic fundamentals, Markov-switching, volatile sate, stable state, probability of a crisis, logit model |
| JEL: | F31 F40 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:07-07&r=sea |
| By: | Joshua Aizenman |
| Abstract: | This paper analyzes competing interpretations for the large increases in the hoarding of international reserves by developing countries. While the first phase of the rapid hoarding of reserves in the aftermath of the East Asian crisis has been dominated by self insurance against exposure to foreign shocks, the self insurance motive falls short of explaining the hoarding in Asia in the 2000s. These developments may be a symptom of an emerging new global financial architecture, which is manifested in the proliferation of decentralized and less cooperative arrangements. The emerging financial configuration of developing countries in the aftermath of the 1990s crises has been growing managed exchange rate flexibility, greater monetary independence, and deeper financial integration. Hoarding international reserves is a key ingredient enhancing the stability of this emerging configuration. While not a panacea, international reserves help by providing self insurance against sudden stops; mitigating REER effects of TOT shocks; smoothing overtime the adjustment to shocks by allowing more persistent current account patterns; and possibly even export promotion, though this mercantilist use of reserves remains debatable due to possible coordination issues. Countries following an export oriented growth strategy may end up with competitive hoarding, akin to competitive devaluations. The sheer size of China, and its lower sterilization costs suggests that China may be the winner of a hoarding game. Hoarding international reserves may also be motivated by a desire to deal with vulnerability to internal and external instability, which is magnified by exposure of the banking system to non performing loans. Testing the self insurance and precautionary motives in the context of China may be challenged by a version of the "peso problem." Hoarding international reserves and sterilization have been complementing each other during the last ten years, as developing countries have increased the intensity of both margins. |
| JEL: | F02 F1 F15 F31 F32 F33 F36 F4 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13277&r=sea |
| By: | Tatom, John |
| Abstract: | This paper looks at interest rate developments in the US and argues that long-term real interest rates are at lows not seen in the past 50 years. It explores competing hypotheses that there is a global saving glut, there is conundrum or that global capital formation has slowed. The dominant view is a glut of saving, especially in China and Asia, that is depressing global real interest rates and boosting growth. While private sector capital formation remains at historic strong levels in the US, the same is not the case abroad. Unfortunately strong saving in China had not resulted in a boom in saving in Asia or globally. A decline in global capital formation is the proximate cause of depressed real interest rates. This is not a cyclical problem that is likely to go away with a rebound in economic activity in Asia or Europe. The implications for economic growth are dismal, despite notable exceptions in China and the US. |
| Keywords: | interest rates; capital formation; saving |
| JEL: | G15 F4 E21 |
| Date: | 2007–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4113&r=sea |
| By: | Fabio Braggion; Lawrence J. Christiano; Jorge Roldos |
| Abstract: | In the wake of the 1997-98 financial crises, interest rates in Asia were raised immediately, and then reduced sharply. We describe an environment in which this is the optimal monetary policy. The optimality of the immediate rise in the interest rate is an example of the theory of the second best: although high interest rates introduce an inefficiency wedge into the labor market, they are nevertheless welfare improving because they mitigate distortions due to binding collateral constraints. Over time, as various real frictions wear off and the collateral constraint is less binding, the familiar Friedman forces dominate, and interest rates are optimally set as low as possible. |
| JEL: | E4 E44 E5 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13254&r=sea |
| By: | Jones, Nicola; Nguyen, Ngoc Anh; Nguyen, Thu Hang |
| Abstract: | Following extensive economic and market reforms and more than a decade of negotiations, Vietnam became the latest country to accede to the World Trade Organization in November 2006. While it is expected that greater liberalisation will boost VietnamÃÂâÃÂÃÂÃÂÃÂs economic growth and contribute to the countryÃÂâÃÂÃÂÃÂÃÂs ongoing transition towards a market economy, there are concerns about potentially negative impacts on vulnerable sectors of the population, including remote rural populations, women and children. In order to explore the possible impacts of VietnamÃÂâÃÂÃÂÃÂÃÂs trade liberalisation on children in poor communities, this paper examines key mediating factors that impact child welfare and the ways that trade liberalisation could affect these variables. It focuses on three key aspects of child well-being ÃÂâÃÂÃÂÃÂàchild work (domestic and extra-household), educational attainment and health status. It applies a mixed methods approach: econometrics analysis using data from the first wave of the Young Lives Vietnam longitudinal survey on childhood poverty combined within in-depth qualitative analysis of two key agricultural commodity sectors, aquaculture and sugarcane, that are expected to be significantly impacted by VietnamÃÂâÃÂÃÂÃÂÃÂs integration into the world economy. Our main quantitative findings point to significant differences in child well-being outcomes based on ethnicity, household poverty status and vulnerability to declining living standards, parental (especially maternal) education levels, childrenÃÂâÃÂÃÂÃÂÃÂs involvement in work activities, and access to public services. Our qualitative findings highlight the implications of caregiversÃÂâÃÂÃÂÃÂàshifting time inputs to productive and care economy work on child well-being, familial coping strategies in the context of economic shocks, the importance of social capital in mediating economic opportunities as well as differences in livelihood patterns among majority and minority ethnic groups. The paper concludes by discussing why mixed methods research can play an important role in focusing greater policy attention on the linkages between economic globalisation and childrenÃÂâÃÂÃÂÃÂÃÂs experiences of poverty. |
| Keywords: | Vietnam; Intrahousehold dynamics; Trade liberalisation; q2 analysis; Young lives; |
| JEL: | F49 I0 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4206&r=sea |