nep-sea New Economics Papers
on South East Asia
Issue of 2008‒02‒02
eight papers chosen by
Kavita Iyengar
Asian Development Bank

  1. East Asian Currency Area: A Bayesian Dynamic Factor Model Analysis By Toan Nguyen
  2. East Asian Crisis and Currency Pressure: The Case of India By Pami Dua; Arunima Sinha
  3. Housing finance agencies in Asia By Michael Davies; Jacob Gyntelberg; Eric Chan
  4. Political Economy Origins of Financial Markets in Europe and Asia By Svetlana Andrianova; Panicos Demetriades; Chenggang Xu
  5. Testing for Asset Market Linkages: A new Approach based on Time-Varying Copulas By Manner Hans; Candelon Bertrand
  6. Mental health patterns and consequences : results from survey data in five developing countries By Friedman, Jed; Do, Quy-Toan; Das, Jishnu
  8. The Transfer Paradox in a One-Sector Overlapping Generations Model By Partha Sen; Emily T. Cremers

  1. By: Toan Nguyen (Economic Research Section, 1st Floor Engineering Building No 4 Kyoto Univeristy Yoshida Honmachi, Sakyo-ku Kyoto, Japan)
    Abstract: There has been recently increasing interest in the establishment of a common currency area in East Asia in the aftermath of the East Asian financial crisis. In this paper, we examine the desirability and feasibility of forming a currency area in the region by checking the symmetry of shocks as an important criterion of the Theory of Optimum Currency Area. We employ a Dynamic Factor Model to decompose aggregate output into global, regional and country-specific components and estimate the model using Gibbs sampling simulation. Persistent properties of those components are examined and variance decomposition analysis is performed to investigate the role of each component in output variance. Based on variance analysis, we find that East Asia countries, on average, are less plausible candidates for a currency area than European counterparts. However, a subgroup of countries in East Asia are as qualified as those in Europe. Given the ongoing integration in East Asia, it is not premature to prepare for such a currency area in this region.
    Keywords: East Asia, Currency Area, Bayesian, Dynamic Factor Model, Gibbs Sampling
    JEL: F33 F42
    Date: 2008
  2. By: Pami Dua (Department of Economics, Delhi School of Economics, Delhi, India and Economic Cycle Research Institute, New York); Arunima Sinha (Department of Economics, Columbia University, New York, NY)
    Abstract: This paper tests and explains the impact of the East Asian crisis on India’s exchange rate. To examine this, an index of currency pressure is estimated for four countries -- Thailand, South Korea, Malaysia and India covering the period just before, during and after the crisis. A contagion model with panel data for these four countries is also estimated during the crisis period. On the basis of the panel data estimates, the paper concludes that while India experienced some effects of the crisis, these were not substantive. This is partly attributed to the role of stabilisation policy in India that included intervention in the foreign exchange market by the central bank, phased tightening of monetary policy and restrictions on capital flows.
    Date: 2007–08
  3. By: Michael Davies; Jacob Gyntelberg; Eric Chan
    Abstract: This paper examines the role of government-supported housing finance agencies in Asia. We estimate the size of the government subsidies received by these agencies, and their distribution among households, financial institutions and the agencies themselves. We have three main findings. The level of government support provided to housing finance agencies in Asia varies, but is generally small relative to the economy. The housing finance agencies have transferred most of the benefit of their government support to either households or financial institutions. Agencies that participate directly in primary housing finance markets have been most successful in passing on their government support to households.
    Keywords: mortgages, Asia, housing finance agencies, government subsidies, government guarantee
    Date: 2007–12
  4. By: Svetlana Andrianova; Panicos Demetriades; Chenggang Xu
    Abstract: This paper contributes to the finance-growth literature by examining the political economy origins of some of the most successful financial markets in Europe and Asia. It provides historical evidence from London, Amsterdam and Hong Kong that highlights the essential role played by the government sector in kick-starting financial development. We show that the emergence of financial systems did not occur through laissez-faire approaches and that secure property rights alone were not sufficient for financial development. In the cases of London and Amsterdam, governments created large trade monopolies which were responsible for all the major financial innovations of the time. In the case of Hong Kong, where the financial developmentmodel was bank-based, large banking monopolies with close links to the state were created. We argue that the three examples are not special cases and the role of government in the early stages of financial development has been widespread world-wide.
    Date: 2008–01
  5. By: Manner Hans; Candelon Bertrand (METEOR)
    Abstract: This paper proposes a new approach based on time-varying copulas to test for the presence of increases in stock market interdependence after financial crises, also known as shift-contagion process. We show that the previous approaches that take into account changes in volatility regimes are biased when the DGP is either copula based or when there is a break in variance significantly different from the one in correlation. A sequential algorithm is then elaborated to remove this bias. Applied to the recent 1997 Asian crisis, it confirms that breaks in variances always precede those in conditional correlation. It also turns out that this financial turmoil has been characterized by shift-contagion.
    Keywords: financial economics and financial management ;
    Date: 2007
  6. By: Friedman, Jed; Do, Quy-Toan; Das, Jishnu
    Abstract: The social and economic consequences of poor mental health in the developing world are presumed to be significant, yet are largely under-researched. The authors argue that mental health modules can be meaningfully added to multi-purpose household surveys in developing countries, and used to investigate this relationship. Data from nationally representative surveys in Bosnia and Herzegovina, Indonesia, and Mexico, along with special surveys from India and Tonga, show similar patterns of association between mental health and socioeconomic characteristics across countries. Individuals who are older, female, widowed, and report poor physical health are more likely to report worse mental health outcomes. Individuals living with others with poor mental health are also significantly more likely to report worse mental health themselves. In contrast, there is little observed relationship between mental health and poverty or education, common measures of socio-economic status. The results instead suggest that economic and multi-dimensional shocks such as illness or crisis can have a greater impact on mental health than overall levels of poverty. This may have important implications for social protection policy. The authors also find significant associations between poor mental health and lowered labor force participation (especially for women) and higher frequency visits to health centers, suggesting that poor mental health can have significant economic consequences for households and the health system. Finally, the paper discusses how measures of mental health are distinct from general subjective welfare measures such as happiness and indicate useful directions of future research.
    Keywords: Health Monitoring & Evaluation,Disease Control & Prevention,Gender and Health,Health Systems Development & Reform,Mental Health
    Date: 2008–01–01
  7. By: Renee Fry; Vance L. Martin; Chrismin Tang
    Abstract: A new class of tests of contagion is proposed which identifies transmission channels of financial market crises through changes in higher order moments of the distribution of returns such as coskewness. Applying the framework to test for contagion in real estate and equity markets following the Hong Kong crisis in 1997-1998 and the US subprime mortgage crisis in 2007 shows that the coskewness based tests of contagion detect additional channels that are not identified by the correlation based tests. Implications of contagion in pricing exchange options where there is a change in higher order comoments of returns on the underlying assets, are also investigated.
    Date: 2008–02
  8. By: Partha Sen (Department of Economics, Delhi School of Economics, Delhi, India); Emily T. Cremers (National University of Singapore)
    Abstract: This paper examines the effects of international income transfers on welfare and capital accumulation in a one-sector overlapping generations model. It is shown that a strong form of the transfer paradox-- in which the donor country experiences a welfare gain while the recipient country experiences a welfare loss—may occur both in and out of steady state. In addition, it is shown that a weak form of the transfer paradox—where either the donor or recipient (but not both) experience paradoxical welfare effects—may characterize all segments of the transition path not already characterized by the strong transfer paradox. The results are explained by the effects of transfers on world capital accumulation and the world interest rate, which imply secondary intertemporal welfare effects large enough to dominate the initial effects of the income transfer.
    Keywords: Transfer problem, transfer paradox, dynamics, one-sector overlapping generations model
    JEL: F11 F35 F43 O19 O41
    Date: 2007–08

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