nep-sea New Economics Papers
on South East Asia
Issue of 2008‒03‒01
nine papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Real interest rate parity: evidence from East Asian economies relative to China By Liew , Venus Khim-Sen; Ling, Tai-Hu
  2. Day-of-the-week effects in selected East Asian stock markets By Chia, Rick Chee-Jiun Chia; Liew, Venus Khim-Sen; Syed Khalid Wafa, Syed Azizi Wafa
  3. Capital Flows and Demographics--An Asian Perspective By Erik Lueth
  4. Susceptibility to Smoking among Non-smoking East-Asian Youth: A Multilevel Analysis By G. Emmanuel Guindon; Kathy Georgiades; Michael H. Boyle
  5. Why Has the Border Effect in the Japanese Machinery Sectors Declined? The Role of Business Networks in East Asian-Machinery Trade By Kyoji Fukao; Toshihiro Okubo
  6. The real interest rate differential: international evidence based on nonlinear unit root tests By Baharumshah, Ahmad Zubaidi; Liew, Venus Khim-Sen; Chan, Tze-Haw
  7. Capital Flows and Economic Fluctuations: The Role of Commercials Banks in Transmitting Shocks By Yong Sarah Zhou
  9. Will Women Be Women? Analyzing the Gender Difference among Financial Experts By Beckmann, Daniela; Menkhoff, Lukas

  1. By: Liew , Venus Khim-Sen; Ling, Tai-Hu
    Abstract: This study examines the real interest rate parity (RIP) hypothesis in the case of East Asian economies by taking China as foreign counterpart. Results obtained from panel unit root tests are in line with previous findings that are supportive of the hypothesis. The estimated half-life of the RIP deviations is 3.21 quarters, indicating RIP holds strongly in this region with respect to China. This implies that the choices and effectiveness of the monetary and fiscal policies in the East Asian economies will be very much influenced by the external factors originating from China, in additional to Japan and US as identified in other studies. Furthermore, judging from the another finding of this study that East Asian economies is more integrated with Japan than China, China has yet to further liberalize its financial system before it can overtake Japan as leading financial centre or as anchor country for common currency area in this region.
    Keywords: Real interest rate parity;East Asia; panel unit root test
    JEL: C23 F41 F36
    Date: 2008
  2. By: Chia, Rick Chee-Jiun Chia; Liew, Venus Khim-Sen; Syed Khalid Wafa, Syed Azizi Wafa
    Abstract: This study examines the day-of-the-week effects in the Taiwan, Singapore, Hong Kong and South Korea stock markets. Various significant day-of-the-week effects, including the typical negative Monday and positive Friday effects are detected in the stock markets Taiwan, Singapore and Hong Kong. Further analysis shows that only Friday effect in Taiwan is sustainable while all other effects disappeared completely after accounting for equity risks. Besides, this study also finds evidences of risk and return tradeoff as well as asymmetrical market effects.
    Keywords: calender anomalies; day-of-the-week effects; East Asian; EGARCH-M Model.
    JEL: G12 C22
    Date: 2007
  3. By: Erik Lueth
    Abstract: This paper calibrates the production functions of 176 countries to fit 2003 data and examines the capital flows that emerge, when labor forces change according to the 2007 UN population projections. It finds that demographic factors are no help in correcting today's global imbalances; that Japan's capital outflows have as much to do with population aging as with the yen carry-trade; and that China is key to understanding Asia's demographic impact on the world. It also finds that Asia offers the greatest arbitrage opportunities worldwide during the demographic transition and has the greatest potential for regional financial integration among world regions. Moreover, the demographic transition is unlikely to result in an asset price meltdown and could even raise world interest rates under perfect capital mobility.
    Keywords: Capital flows , Asia , Labor , Population , Aging , Interest rates ,
    Date: 2008–01–31
  4. By: G. Emmanuel Guindon (Centre for Health Economics and Policy Analysis, Department of Clinical Epidemiology and Biostatistics, McMaster University); Kathy Georgiades; Michael H. Boyle (Offord Centre for Child Studies, Department of Psychiatry and Behavioural Neurosciences, McMaster University)
    Abstract: Objective - Among non-smoking youth in east-Asia, to estimate the extent to which susceptibility to smoking is associated with between-context differences (schools and classes) and to identify factors at school, class and individual levels that influence individual susceptibility to smoking. Methods - Cross-sectional data from the Global Youth Tobacco Survey conducted in Cambodia (2002), Laos (2003) and Vietnam (2003) are used to conduct multilevel analyses that account for the nesting of students in classes and classes in schools. The outcome variable is smoking susceptibility, defined as the absence of a firm decision not to smoke and measured using a validated algorithm. Explanatory variables include school and class level influences (current tobacco use prevalence in school, exposure to anti-smoking media messages, exposure to tobacco billboard advertising and school prevention) and individual level influences (parent and friends smoking behaviour, knowledge of the harmful effects of and exposure to secondhand smoke at home, age, sex and pocket income). Results - Multilevel analyses indicate that about 10 percent of the variation in smoking susceptibility is associated with school and class differences. Teens who have parents or friends who smoke, who are exposed to secondhand smoke at home and those who have access to pocket income are found to be more susceptible while better knowledge of the harmful effects of secondhand smoke appears to diminish susceptibility to smoking. For girls only, billboard tobacco advertising increases the risk for susceptibility and school prevention decreases risk while for boys only, attendance to schools with higher prevalence of tobacco use increases risk for susceptibility and anti-smoking media messages decreases risk. Conclusions - This study highlights a number of modifiable factors associated with smoking susceptibility and identifies interactions between teen sex and several factors associated with the susceptibility to smoking. This finding provides support to the call to move beyond genderblind tobacco control policies.
    Keywords: smoking susceptibility, multilevel logistic models, developing countries, Cambodia, Laos, Vietnam
    Date: 2007
  5. By: Kyoji Fukao; Toshihiro Okubo
    Abstract: This paper analyzes the causes of the decline in Japan's border effect in four machinery industries (electrical, general, precision, and transportation machinery) by estimating gravity equations for Japan's international and interregional trade. In the estimation, we explicitly take account of firms' networks. We find that ownership relations usually enhance trade between two regions (countries); moreover, we find that we can explain 35% of the decline in Japan's border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks.
    Keywords: Gravity Model, Border Effect, Networks, Fragmentation
    JEL: F14 F17 F21 L14
    Date: 2008–02
  6. By: Baharumshah, Ahmad Zubaidi; Liew, Venus Khim-Sen; Chan, Tze-Haw
    Abstract: This paper aims at testing international parity conditions by using nonlinear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards the RIP follows a nonlinear process except for the Malaysian relationships with both the US and Japan. Overall, the empirical results are in favor of RIP using the US and Japan as the center countries but only if nonlinearities are accounted for in the data generating process. Our findings confirm that interest rate differentials, like the real exchange rates reported in recent literature, display a nonlinear mean reversion process.
    Keywords: real interest parity; nonlinearities; unit root tests
    JEL: F32 F36
    Date: 2007
  7. By: Yong Sarah Zhou
    Abstract: This paper uses a general equilibrium model to examine the central role played by commercial banks in intermediating and amplifying the capital flow shocks to the local economy in the 1997 Asia financial crisis. It finds that a sudden stop of capital inflows affects the equilibrium credit supply through two channels: first, the plunge of foreign financing decreases the loanable funds directly; and second the sudden stop drives up the cost of providing banking services, thereby additionally reducing the available bank credit to firms through a "deposit run". Empirical results from a VAR model broadly support the theoretical implications.
    Keywords: Capital flows , Bank credit , Employment , Financial crisis ,
    Date: 2008–01–29
  8. By: Tilak Abeysinghe (Department of Economics, National University of Singapore); Ananda Jayawickrama
    Abstract: Apart from aggregate accounting of Singapore’s investment abroad, case studies on the performance of these investments in individual countries hardly exist. This paper is an attempt to compile such a study by focusing on Singapore’s investment in Sri Lanka. Singapore is one of the largest foreign investors in Sri Lanka though Sri Lanka is a small recipient of Singapore’s total overseas investment. The bulk of Singapore’s investment in Sri Lanka has been in service industries. As usual these investments have created many employment opportunities. However, because of high import dependence the Singapore firms in Sri Lanka have begun to generate trade surpluses only recently. Revealed comparative advantage indices combined with attractive fiscal incentives and low-cost factors of production indicate that there are large investment opportunities in the manufacturing sector that remain to be exploited. The ongoing war obviously has deterred the expansion of Sri Lanka’s FDI base to its full extent.
    Keywords: Economic and social indicators, foreign direct investment, employment, trade balance, revealed comparative advantage, future investment opportunities.
    JEL: F21 F23 F14
  9. By: Beckmann, Daniela; Menkhoff, Lukas
    Abstract: There are robust gender differences in the domains of risk taking, overconfidence and competition behavior. However, as expertise tends to level these differences, we ask whether financial experts still show gender dissimilarities in their domains of decision making? We analyze survey responses of 649 fund managers in the U.S., Germany, Italy and Thailand, and find that female fund managers tend to behave as expected from gender studies: they are more risk averse and shy away from competition in the tournament scenario. The expected lower degree of overconfidence by women is yet so small that it becomes insignificant in fund management.
    Keywords: fund managers, gender differences, risk, overconfidence, tournament behavior
    JEL: J16 G23 D8
    Date: 2008–02

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