nep-sea New Economics Papers
on South East Asia
Issue of 2007‒09‒16
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Unchained Melody: Economic Performance After the Asian Crisis By Beja, Jr., Edsel
  2. Real Effects of Common Currencies in East Asia By Kazuko Shirono
  3. Free boundary and optimal stopping problems for American Asian options By Andrea, Pascucci
  4. Financing Constraint and Firm-Level Investment Following a Financial Crisis in Indonesia By Agustinus Prasetyantoko
  5. Decomposing and Analyzing Korea’s Declining GDP Growth: Some Cautions and Suggestions By Sumner La Croix
  6. Forest management policies and resource balance in China: an assessment of the current situation By Sylvie Démurger; Yang Weiyong; Hou Yuanzhao
  7. Long-Term Effects Of The 1959-1961 China Famine: Mainland China and Hong Kong By Douglas Almond; Lena Edlund; Hongbin Li; Junsen Zhang
  8. Explaining China's Low Consumption: The Neglected Role of Household Income By Li Cui; Jahangir Aziz
  9. Bank panics in transition economies By Niinimäki, Juha-Pekka
  10. Currency Crises in Emerging Markets: Capital Flows and Herding Behaviour By Komulainen , Tuomas
  11. Différentiels salariaux, segmentation et discrimination à l’égard des femmes sur le marché du travail chinois By Yi Chen; Sylvie Démurger; Martin Fournier
  12. Diversification and agrarian change under environmental constraints in rural China: Evidence from a poor township of Beijing municipality By Sylvie Démurger; Martin Fournier; Yang Weiyong
  13. International investors, contagion and the Russian crisis By Medvedev, Alexei
  14. International Financial Integration Through Equity Markets: Which Firms from Which Countries Go Global? By Sergio L. Schmukler; Stijn Claessens
  15. Investors' Behaviour in the Chinese Stock;Exchanges: Empirical Evidence in a Systemic;Approach By Giulio PALOMBA; Caterina LUCARELLI
  16. Forensic Accounting: Hidden balance of payments of the Philippines By Beja, Jr., Edsel
  17. Financial Reforms, Financial Openness, and Corporate Borrowing: International Evidence By Gianni De Nicoló; Senay Agca; Enrica Detragiache
  18. The Knowledge Spillover Theory of Entrepreneurship and Foreign Direct Investment By Zoltan J. Acs; David J. Brooksbank; Colm O'Gorman; David G. Pickernell; Siri Terjesen

  1. By: Beja, Jr., Edsel
    Abstract: Indonesia, Malaysia, Philippines, South Korea, and Thailand have not recouped their losses from the 1997 Asian Crisis. Unless their economic performances better than the recent trends, another economic miracle story is needed to reclaim past economic standings. Unless economic policies move in a positive direction – taking up the useful strategies in the past but also putting in new components for the current challenges – economic progress is limited and punctuated by crises.
    Keywords: Asian Crisis; Indonesia; Malaysia; Philippines; South Korea; Thailand
    JEL: O50 N10
    Date: 2007–05–15
  2. By: Kazuko Shirono
    Abstract: Since the 1997 Asian currency crisis, new interest has emerged in the formation of a common currency area in East Asia. This paper provides estimates of trade and welfare effects of East Asian currency unions, using a micro-founded gravity model. Counter-factual experiments to assess the effects of various hypothetical currency arrangements for East Asia suggest that an East Asian currency union will double bilateral trade in the region, but the resulting welfare effects will be moderate. However, if Japan, a major trade partner for East Asia, is included in the union, welfare effects increase substantially. The evidence thus suggests that certain regional currency arrangements in East Asia will stimulate regional trade rigorously and can generate economically significant welfare gains.
    Date: 2007–07–17
  3. By: Andrea, Pascucci
    Abstract: We give a complete and self-contained proof of the existence of a strong solution to the free boundary and optimal stopping problems for pricing American path dependent options. The framework is su±ciently general to include geometric Asian options with non-constant volatility and recent path-dependent volatility models.
    Keywords: optimal stopping; free boundary; Asian option; American option
    JEL: C02 G13
    Date: 2007–09–07
  4. By: Agustinus Prasetyantoko (GATE CNRS)
    Abstract: This paper deals with the sensitivity relation between firm investment and internal liquidity by splitting samples into two different groups of firm, namely the tradable (T) and non-tradable (N) sectors. This paper finds that during boom periods, there is no significant financial constraint on the T and N sectors. In post-crisis periods, it seems that both sectors also have no significant important problem in their internal finance. Both sectors basically move comparably. The main finding is relatively different with several theoretical predictions, especially Tornell and Westermann (2002a, 2004), in which the T-sector would be predicted as experiencing less financial constraint in burst period. However, we find that debt is important variable for sustaining investment in Indonesia. By employing panel data analysis, the findings of this study can shed light on the financing behavior of listed companies in Indonesia, as well as on their investment behavior in the midst of financing constraints and credit market imperfections. The study’s sample contains 147 companies listed on the Jakarta Stock exchange for at least 5 five consecutive years between 1994 – 2004.
    Keywords: asymmetric financing opportunities, financial crisis, financing constraint, firm investment
    JEL: D2 E51 G31
    Date: 2007–07
  5. By: Sumner La Croix (Department of Economics, University of Hawaii at Manoa)
    Abstract: Chin Hee Hahn and Sukha Shin (2007) have developed new decompositions of Korean economic growth from 1990 to 2004. They find that Korea’s declining GDP growth has been accompanied by a sharp decline in capital deepening and an increase in total factor productivity. By contrast, Jorgenson and Vu’s (2007) decompositions of Korea’s GDP growth find that total factor productivity decreased over this period. This paper compares the two decompositions; evaluates Hahn and Shin’s hypothesis that competition from Chinese imports may be driving the decline in GDP growth; and briefly presents four other candidates (decline in Korean savings, business cycle effects, weak IT investment, and regulatory and wealth redistribution initiatives) that could be partially responsible for the slowdown in Korean GDP growth.
    Keywords: GDP, TFP, China, Korea, capital, labor, decomposition, productivity.
    Date: 2007–08–13
  6. By: Sylvie Démurger (GATE CNRS); Yang Weiyong (University of International Business & Economics, Beijing, China); Hou Yuanzhao (Chinese Academy of Forestry, Beijing, China)
    Abstract: Using the latest forest inventory, this paper provides a comprehensive analysis of China’s forest sector by focusing on new forest trends, forest policy changes and challenges to achieve a sustainable forest management. We analyze the dynamics of forest resources and provide an impact assessment of forest policies on China’s forestry development over the last decades. Moreover, the analysis of the forest market highlights substantial disequilibria marked by a limited domestic supply potential and a growing demand for forest products satisfied by increasing imports. Internal and external solutions are explored and their implications for China and supplying countries are assessed.
    Keywords: China - Forest management - Forest resources
    JEL: O13 O53 Q23 Q28
    Date: 2007–04
  7. By: Douglas Almond; Lena Edlund; Hongbin Li; Junsen Zhang
    Abstract: This paper estimates the effects of maternal malnutrition exploiting the 1959-1961 Chinese famine as a natural experiment. In the 1% sample of the 2000 Chinese Census, we find that fetal exposure to acute maternal malnutrition had compromised a range of socioeconomic outcomes, including: literacy, labor market status, wealth and marriage market outcomes. Women married spouses with less education and later, as did men, if at all. In addition, maternal malnutrition reduced the sex ratio (males to females) in two generations -- those prenatally exposed and their children -- presumably through heightened male mortality. This tendency toward female offspring is interpretable in light of the Trivers-Willard (1973) hypothesis, according to which parents in poor condition should skew the offspring sex ratio toward daughters. Hong Kong natality micro data from 1984-2004 further confirm this pattern of female offspring among mainland-born residents exposed to malnutrition in utero.
    JEL: I10 I12 J12 J13 J16 J24 P2
    Date: 2007–09
  8. By: Li Cui; Jahangir Aziz
    Abstract: The Chinese government has recently focused on the need to increase consumption to rebalance the economy. A widely held view is that despite China's remarkably high growth, the share of consumption in total expenditure has been low and declining due to high and rising saving rate of Chinese households as uncertainty over provision of pensions, and healthcare and education costs have increased since the mid-1990s. This paper finds that the rise in saving rate has been a minor factor. Much larger has been the role of the declining share of household income in national income, which has occurred across-the-board in wages, investment income, and government transfers. The paper finds that financial sector weaknesses, by restricting firms' access to bank financing for working capital, have played quantitatively a major role in keeping wage and investment income shares low and on a declining trend.
    Keywords: Working Paper , China, People's Republic of ,
    Date: 2007–07–26
  9. By: Niinimäki, Juha-Pekka (BOFIT)
    Abstract: This paper discusses recent bank runs in seven transition economies (Russia, Bulgaria, Estonia, Hungary, Latvia, Lithuania and Romania), comparing them against the older US experience and theoretical research. Bank runs seem to usually be information based. For example, improvements in bank transparency such as new accounting rules can reveal a bank’s insolvency and trigger a run. However, bank runs, as seen a few years ago in East Asia, Bulgaria and Russia, may also be accompanied by runs on national currencies. We include a bank run model that shows a bank may issue liquid demand deposits and avoid runs without deposit insurance as long as it also issues less liquid time deposits. Self-fulfilling runs are prevented through elimination of the maturity mismatch. The well-known Diamond & Dybvig (1983) model is modified to account for depositors’ risk affinities, whereby high-risk depositors hold their savings as demand deposits and low-risk depositors prefer time deposits. These deposit choices transfer liquidity optimally from low-risk to high-risk depositors who value liquidity. By exploiting these choices, a bank can improve its intertemporal risk-sharing by issuing deposits of varying degrees of liquidity. This maturity transformation does not necessarily raise the economy’s total liquidity.
    Keywords: ansition economies; bank panics; bank regulation; financial crises
    Date: 2007–09–11
  10. By: Komulainen , Tuomas (BOFIT)
    Abstract: This study shows that due to herding behaviour and possible capital outflows, emerging market countries are vulnerable to multiple equilibria situations and currency crises. It uses a model by Jeanne (1997), where currency crises can be formed by multiple equilibria and self-fulfilling expectations. We determine the country fundamentals according to balance of payments approach. In this study we introduce capital flows, which depend from crisis probability, into the model. The capital flows are further assumed to follow herding behaviour, which produces a reason and mechanism for the large capital outflows witnessed during the recent crises. The range of country fundamentals, where self-fulfilling crises are possible, is now larger than without capital flows and herding behaviour. Consequently, the country fundamentals have to be better, if the country wants to stay totally out of crises. The model further points out lender interdependence as one shortcoming in the current structure of international capital markets. An empirical application of the model to the Mexican and Asian crises shows that when the possible capital outflows are included, the fundamentals of most emerging market countries were inside the range of multiple equilibria in 1994 and 1996, and so self-fulfilling crises were possible.
    Date: 2007–09–13
  11. By: Yi Chen (CERDI, Université d'Auvergne); Sylvie Démurger (GATE CNRS); Martin Fournier (GATE CNRS)
    Abstract: Cet article analyse conjointement la stratification du marché du travail urbain par type d’entreprise et la discrimination à l’égard des femmes en Chine urbaine pour l’année 1995, à l’aide d’une extension des méthodes de décomposition de type Oaxaca-Blinder. Nous montrons que les deux dimensions sont fortement liées et que l’absence de discrimination à l’égard des femmes dans les entreprises à capitaux étrangers est en grande partie le fait de la structure de segmentation.
    Keywords: China, discrimination, enterprises ownership, labor market
    JEL: J31 J42 O53 P23
    Date: 2007–04
  12. By: Sylvie Démurger (GATE CNRS); Martin Fournier (GATE CNRS); Yang Weiyong (University of International Business & Economics, Beijing, China)
    Abstract: This article illustrates the impact of changes related to market reforms and environmental policies on the economic structure in rural China by providing a comparative analysis of several villages in a poor township in Beijing municipality. Two main concomitant phenomena are affecting agricultural and non-agricultural choices in the studied area. First, the introduction of market mechanisms is encouraging local population to engage in new activities that are closer to local comparative advantages. Second, rural households are facing new constraints in the form of environmental protection measures, which have weakened traditional insurance channels provided by forest resources and cattle stock. Drawing on household-level survey data and interviews with village heads conducted in ten villages of Labagoumen township in December 2003, this article analyzes households decisions in response to market reforms and environmental constraints. We find large disparities both between villages and households in the diversification process and discuss the reasons of observed inertia in the region, most households still heavily relying on corn production.
    Keywords: agrarian change, Environmental protection, Income-source diversification, rural China
    JEL: O18 O53 Q10 R20
    Date: 2007–04
  13. By: Medvedev, Alexei (BOFIT)
    Abstract: The paper provides detailed empirical assessment of the role of non-residents in the development of Rus-sian financial crisis in 1997-1998. It is established that non-residents behaved differently during the pe-riod of crisis and significantly contributed to the collapse of the state bonds market. In particular, we found that sharp downturn in May 1998 was caused by contagious selling on the part of foreign investors following Indonesian crisis. At the same time, we question the common view that non-residents were lar-gely responsible for market pressures at the initial stage of the crisis. In this paper we go a little beyond the discussion of Russian crisis and propose alternative explanation of contagious outflow of foreign ca-pital. We combine CAPM and findings of Forbes and Rigobon (2001) to show that international portfolio investors are more sensitive to pure external shocks and less sensitive to pure domestic ones.
    Keywords: financial markets; financial crises; Russia; contagion
    Date: 2007–09–12
  14. By: Sergio L. Schmukler; Stijn Claessens
    Abstract: This paper studies international financial integration analyzing firms from various countries raising capital, trading equity, and/or cross-listing in major world stock markets. Using a large sample of 39,517 firms from 111 countries covering the period 1989-2000, we find that, although international financial integration increases substantially over this period, only relatively few countries and firms actively participate in international markets. Firms more likely to internationalize are from larger and more open economies, with higher income, better macroeconomic policies, and worse institutional environments. These firms tend to be larger, grow faster, and have higher returns and more foreign sales. While changes occur with internationalization, these firm attributes are present before internationalization takes place. The results suggest that international financial integration will likely remain constrained by country and firm characteristics.
    Date: 2007–06–22
  15. By: Giulio PALOMBA ([n.a.]); Caterina LUCARELLI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: This paper investigates the Chinese mainland Stock Exchanges and their following;interconnecting features: savers' attitude towards stock investments,;investors' trading behaviour and stock returns explanations. We evaluate;the eectiveness of the recent eorts made by the Chinese authorities to;improve the level of legal protections for shareholders and the opening-up;of the Chinese Stock Markets to foreign investors. The whole analysis is;carried out through a system of simultaneous equations. The main results;are that Chinese shareholders and stock markets are mostly driven by emotional;behaviour. Stock market returns are barely influenced by the overall;chinese economic booming, but reveal the presence of speculative influences.;Investors' behaviour, as well as general trading activities, hardly seems to;be aected by the legal framework introduced by the national Authorities.
    Keywords: chinese stock exchanges, corporate governance, investors' behaviour, shareholders' rights, system of simultaneous equations
    JEL: C30 F30 G18
    Date: 2007–09
  16. By: Beja, Jr., Edsel
    Abstract: An examination of the available data between 1990 and 2005 reveals that the balance of payments of the Philippines does not record large amounts of international transactions. Unrecorded international transactions for the 16-year period amount to US$ 192 billion (in 1995 prices). The results suggest a serious problem in the government’s macroeconomic management of the Philippines, and expose a weak or weakening capacity in the governance of international transactions.
    Keywords: Balance of Payments; Capital Flight; Trade Misinvoicing; Other Unrecorded Transactions; Philippines
    JEL: F40 B50 O53 C82 B40
    Date: 2006–11–25
  17. By: Gianni De Nicoló; Senay Agca; Enrica Detragiache
    Abstract: We study how credit market deregulation and increased international financial openness have changed corporate borrowing. The evidence comes from a large panel of publicly traded firms in 38 countries over the period 1994-2002. Reforms are measured with a comprehensive new index that tracks six separate dimensions. We find that these transformations have increased leverage and lengthened debt maturity in advanced economies, as expected, suggesting that in these countries corporate credit markets have become deeper. In emerging economies, the picture is more mixed: more international openness has led to more leverage but shorter debt maturity. Financial sector reforms have reduced leverage, while their effects on debt maturity have differed depending on the type of reform. Importantly, the differential impact of openness and reforms on the leverage and debt maturity of firms in advanced and emerging market countries also emerges when we distinguish between firms that are potentially financially constrained and firms that are not. These findings suggest that in emerging economies fundamental institutional weaknesses make it difficult to secure the benefits of international financial openness and domestic financial reforms.
    Date: 2007–07–30
  18. By: Zoltan J. Acs (George Mason University and Max-Planck-Institute of Economics, Jena); David J. Brooksbank (University of Glamorgan); Colm O'Gorman (Dublin City University); David G. Pickernell (University of Glamorgan); Siri Terjesen (Queensland University of Technology and Max-Planck-Institute of Economics, Jena)
    Abstract: We explore if the Knowledge Spillover Theory of Entrepreneurship, applied to FDI, provides at least a partial explanation for the greater emergence of recent knowledge-based entrepreneurship in Ireland compared with Wales. In order to examine how FDI and entrepreneurship policy in these two regions might have influenced the levels of knowledge-based entrepreneurship, we outline FDI and entrepreneurship policies for Wales and Ireland and key measures of knowledge creation, and evaluate the extent and nature of FDI activity and its relationship with entrepreneurship in general and knowledge-based entrepreneurship in particular. Implications include possible policy directions for countries that are characterized by weak knowledge-creating institutions yet wish to encourage knowledge-based entrepreneurship.
    Keywords: Economic Development, Entrepreneurship, Foreign Direct Investment, Ireland, Knowledge Spillovers, Wales
    JEL: J24 L26 M13
    Date: 2007–09–12

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