nep-sea New Economics Papers
on South East Asia
Issue of 2008‒02‒16
five papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Exchange Rate Policies: Fact or Fiction in the Rise of High Performance Asian Economies By Turan Subasat
  2. Oil Price Movements and the Global Economy: A Model-Based Assessment By Selim Elekdag; Rene Lalonde; Douglas Laxton; Dirk Muir; Paolo Pesenti
  3. China and the Future of Asian Electronics Trade By Byron Gangnes; Ari Van Assche
  4. 'As Close as Lips and Teeth' The Daiichi Ginkō and Megata Tanetarō in Korea By Schiltz, Michael
  5. Impact of a Lower Oil Subsidy on Indonesian Macroeconomic Performance, Agricultural Sector and Poverty Incidences: a Recursive Dynamic Computable General Equilibrium Analysis By Rina Oktaviani; Dedi Budiman Hakim; Hermanto Siregar; Sahara Sahara

  1. By: Turan Subasat (Department of Economics, Izmir University of Economics)
    Abstract: Many economists believe that the nature of exchange rate management was an important reason for rapid economic growth in East Asia. In this view, Asian countries avoided extreme exchange rate appreciations and kept their nominal exchange rates close to market clearing levels. In contrast, the inappropriate exchange rate policies pursued by many Latin American and African countries in the late 1970s and 1980s contributed a great deal towards their poor economic performance. This paper challenges the above views on the type of exchange rate policies adopted by the East Asian, Latin American and African countries. The empirical evidence fails to prove that the exchange rate policies of the East Asian economies were significantly different from those of other developing countries.
    Keywords: Exchange rate policy, Trade policy, East Asian Miracle, exports growth, economic growth
    JEL: F1 O24
    Date: 2008–02
  2. By: Selim Elekdag; Rene Lalonde; Douglas Laxton; Dirk Muir; Paolo Pesenti
    Abstract: We develop a five-region version (Canada, a group of oil exporting countries, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices. In the presence of real adjustment costs that reduce the short- and medium-term responses of oil supply and demand, our simulations can account for large endogenous variations of oil prices with large effects on the terms of trade of oil-exporting versus oil-importing countries (in particular, emerging Asia), and result in significant wealth transfers between regions. This is especially true when we consider a sustained increase in productivity growth or a shift in production technology towards more capital- (and hence oil-) intensive goods in regions such as emerging Asia. In addition, we study the implications of higher taxes on gasoline that are used to reduce taxes on labor income, showing that such a policy could increase world productive capacity while being consistent with a reduction in oil consumption.
    JEL: E66 F32 F47
    Date: 2008–02
  3. By: Byron Gangnes; Ari Van Assche
    Abstract: China’s emergence as a key player in the global electronics industry has ignited concerns among its East Asian neighbors. Upper and middle-income economies fear that China’s rise is hollowing out their electronics industrial base. Lower-income economies worry that they cannot compete with China’s seemingly endless supply of cheap labor. In this chapter, we describe the forces behind China’s rise in electronics, and we consider the implications for regional electronics trade and production patterns. Using a unique world electronics production data set, we investigate the upgrading trajectories of East Asian economies within the industry. Consistent with the theory of international production fragmentation, we find that Japan and the NIEs have a more sophisticated production mix than their lower-income neighbors. These latter economies, however, are upgrading their electronics industries more rapidly. <P>L'émergence de la Chine comme étant un joueur clé dans l'industrie électronique mondiale a suscité de l’inquiétude parmi ses voisins de l'Asie de l'Est. Les économies à revenus élevé et moyen craignent que la montée de la Chine nuise à leur centre industriel électronique. Les économies plus pauvres, pour leur part, s'inquiètent du fait qu'elles ne pourront pas être compétitives face à la main d’œuvre bon marché sans limite de la Chine. Dans ce chapitre, nous décrivons les forces à l’origine de la montée de la Chine dans le domaine de l'électronique, et en étudions les conséquences pour le commerce électronique régional et les modèles de production. Employant une banque de données unique sur la production électronique mondiale, nous examinons les trajectoires de perfectionnement des économies de l’Asie de l’Est dans l’industrie. En accord avec la théorie de fragmentation de la production internationale, nous trouvons que le Japon et les nouvelles économies industrialisées détiennent une combinaison de production plus sophistiquée que leurs voisins à faible revenu. Ces derniers, cependant, voient leurs industries de l'électronique progresser plus rapidement.
    Keywords: China, trade, technological upgrading, electronics, Chine, commerce, perfectionnement technologique, électronique
    JEL: F14 O30 L63
    Date: 2008–02–01
  4. By: Schiltz, Michael
    Abstract: It is by now established knowledge that Japanese interventionist policies versus Korea cannot have been motivated by economic profits. Literature in this respect instead points to socio-political, perhaps military explanations of this instant of Japanese imperialism. Whereas this insight is certainly more satisfying, it does not pay attention to the role of a series of monetary and financial reforms both the Japanese government and the Government-General in Korea sought to implement immediately after the peninsula had been turned into a protectorate. In this paper, we will turn to the pre-history of Korea's annexation; we will highlight a number of inconsistencies at the core of Japanese policies vis-à-vis Korea, and demonstrate that financial and economic considerations eroded the very strategy of establishing Korea as a mere political 'line of interest'. Instead, the very alliance between politicians and people of high finance only reinforced the employment of finance and monetary matters as instruments in facilitating Korea's societal transformation. We will demonstrate how the 'Megata reform', as it came to be called, factually turned Korea into a subsidiary of the Japanese economy. It was a tool aimed to relegate the position of Korea in the Japanese Lebensraum —to which later generations of politicians would refer as the Greater East-Asian Co-Prosperity Sphere (dai tōa kyōeiken 大東亜共栄圏). The Megata reform was thus not an economic answer to an economic problem in the conventional sense. Instead, it was developed in reaction to a strategic need.
    Keywords: money doctoring; colonialism; Japanese empire; Korean money and finance
    JEL: N1 N4
    Date: 2007
  5. By: Rina Oktaviani; Dedi Budiman Hakim; Hermanto Siregar; Sahara Sahara
    Abstract: Budget deficit, exchange rate fluctuation and high fuel world price provides a pressure on budget capacity to stimulate the Indonesian economy. The government has designed several fiscal policies, including reducing the fuel subsidy. The study objective is to analyse the impact of reducing fuel subsidy on macroeconomic variables, agricultural sector, and income distribution. The modification on the basic model, which is a recursive-dynamic CGE model, is made in this study. The data used in the model is of the Indonesian I-O Table 2000, The Indonesian Social Accounting Matrix 2000, National Household Survey data and parameter from some other sources. The results show that the reduction in fuel price subsidy tends to increase prices of industrial outputs that highly depend on fuel, such as transportation and fishery sectors. In contrast, the change in fuel price does not influence the price of paddy. Wage of skilled labor, land rent, and capital rent decline steadily in response to the change in fuel price. Households will lose their income following the reduction in fuel subsidy, which then decreases the welfare of households. Incomes are not evenly distributed within the society (household groups). An increased fuel price at consumer level declines the Indonesian real GDP. The government should give the compensation of reducing the fuel subsidy directly to the poor people. The compensation can also be given directly to the poor people through the development of infrastructure, which may solve some supply side bottlenecks in the economy.
    Keywords: Fuel subsidy, income distribution, recursive dynamic CGE
    JEL: C68 D63 I32 I38 O13
    Date: 2007

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