nep-sea New Economics Papers
on South East Asia
Issue of 2008‒12‒07
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Japanese Yen as as Alternative Vehicle Currency in Asian By M., Azali; R.C., Royfaizal; C., Lee
  2. Is the ASEAN-Korea Free Trade Area (AKFTA) an Optimal Free Trade Area? By Park, Donghyun; Park, Innwon; Estrada, Gemma Esther B.
  3. Defense and Inequality: Evidence from Selected ASIAN Countries By Hirnissa, M.T; Habibullah, M.S.; Baharom, A.H.
  4. Causation analysis between stock price and exchange rate: Pre and post crisis study on Malaysia By Baharom, A.H.; Royfaizal, R. C; Habibullah, M.S.
  5. Capital Formation and Capital Stock in Indonesia, 1950-2007 By Pierre van der Eng
  6. Welfare Implications of International Financial Integration By Lee, Jong-Wha; Shin, Kwanho
  7. Natural disaster death and socio-economic factors in selected Asian countries: A panel data analysis By Padli, Jaharudin; Habibullah, M.S.
  8. The relationship between trade openness, foreign direct investment and growth: Case of Malaysia By Baharom, A.H.; Habibullah, M.S.; Royfaizal, R. C
  10. Testing for Service-Led and Investment-Led Hypothesis: Evidence from ‘Chindia’ By Baharom, A.H.; Habibullah, M.S.
  11. Crime and Income Inequality: The Case of Malaysia By Baharom, A.H.; Habibullah, M.S.
  12. Crime and economic conditions in Malaysia: An ARDL Bounds Testing Approach By Habibullah, M.S.; Baharom, A.H.
  13. The distributional impact of increased school resources: the Specialist Schools Initiative and the Excellence in Cities Programme By Steve Bradley; Jim Taylor; Giuseppe Migali

  1. By: M., Azali; R.C., Royfaizal; C., Lee
    Abstract: Members of Asian countries have been thinking about using others’ currencies instead of U.S. Dollar for regional trade. Hence, there is a strong case to study the Japanese Yen as an alternative hard currency in this region for trade transaction. This paper investigates the long-run co-integration to determine the possibility and feasibility to use Yen as a future vehicle currency in the Asian region namely Malaysia, Singapore, Thailand, Indonesia, the Philippines, China, Korea and India by examining their daily exchange rate movements denominated in Yen. Empirical evidence shows that four out of eight countries namely Malaysia, the Philippines, Singapore and Korea are the countries that support our hypothesis.
    Keywords: Exchange Rate; Cointegration; Granger-causality; Asian
    JEL: F31 F33
    Date: 2008
  2. By: Park, Donghyun (Asian Development Bank); Park, Innwon (Division of International Studies, Korea University); Estrada, Gemma Esther B. (Asian Development Bank)
    Abstract: The 1997/98 Asian currency crisis has led a once high-flying East Asia to realize its vulnerability to external shocks. This realization has given strong impetus to greater economic integration among East Asian economies, with the ASEAN-Korea Free Trade Area (AKFTA) a case in point. This paper qualitatively and quantitatively examines the economic feasibility of AKFTA: qualitatively using the theory of economic integration, and quantitatively by applying a CGE model. Our two-dimensional analysis provides some, but not overwhelming, support for AKFTA's prospects as an effective means of promoting trade between ASEAN and the Republic of Korea.
    Keywords: ASEAN; Korea; trade; free trade area; economic integration
    JEL: F10 F14 F15
    Date: 2008–11–01
  3. By: Hirnissa, M.T; Habibullah, M.S.; Baharom, A.H.
    Abstract: This paper examines the causality between military expenditure and income inequality in selected Asian countries namely Malaysia, Indonesia, Singapore, Philippines, India and South Korea for the period 1970-2005. Autoregressive Distributed Lag (ARDL) bounds testing procedure is employed to (1) analyze the impact of military expenditure on income inequality and (2) the impact of income inequality on military expenditure as well. Interestingly our results indicate one way causality running from military expenditure to income inequality only for the case of Malaysia and bidirectional causality for the case of Singapore. As for the remaining countries, no meaningful relationship could be detected and it can be seen as sign of good governance in these countries.
    Keywords: defense spending; ARDL; Income Inequality
    JEL: E24 E20
    Date: 2008–09–13
  4. By: Baharom, A.H.; Royfaizal, R. C; Habibullah, M.S.
    Abstract: The furore and chaos created by the Asian financial crisis have ignited many studies on numerous subjects, and it is believed that the crisis has changed the way nations being administered and policies formed and implemented especially those regarding monetary and fiscal policies. Johansen (1991) cointegration method was used and the period was divided into two sub periods, albeit pre crisis and post crisis. The results obtained are similar with a number of past literatures pointing to no long run relationship between stock price and exchange rate for both periods.
    Keywords: Stock price; exchange rate; Asian financial crisis; Cointegration.
    JEL: G14 F31
    Date: 2008–02–17
  5. By: Pierre van der Eng
    Abstract: This paper presents long-term estimates of gross fixed capital formation for 1951-2007 that are disaggregated by categories of productive assets. These data, combined with approximations of probable average asset lives and a feasible asset retirement method are used in a Perpetual Inventory Method to estimate gross fixed capital stock in Indonesia for 1950-2007 disaggregated by productive assets. Most of Indonesia’s capital stock long consisted of residential and non-residential structures. Total capital stock grew significantly since the late-1960s at about 10% per year, until the 1997-98 economic crisis. The high capital-output ratio in 1997 suggests that part of Indonesia’s high economic growth during the 1990s was due to unsustainable resource accumulation.
    Keywords: investment, capital formation, capital stock, economic growth, Indonesia
    JEL: E22 E43 N15 O11 O47
    Date: 2008
  6. By: Lee, Jong-Wha (Asian Development Bank); Shin, Kwanho (Department of Economics, Korea University)
    Abstract: Focusing on technology spillover from foreign direct investment (FDI) inflows, this paper investigates the welfare implications of financial integration. Calibrations of a neoclassical growth model with international technology diffusion show that when technology catch-up due to FDI inflows is considered, the welfare gains from financial integration substantially increase, which contrasts with the small gains from additional, capital-accumulation effects of financial integration. The estimates suggest that by further enhancing financial integration, emerging Asian economies, such as the People's Republic of China (PRC) and the largest four Association of Southeast Asian Nations (ASEAN) countries, will experience substantial welfare gains.
    Keywords: Foreign direct investment; financial integration; technology diffusion
    JEL: F21 F36 O33
    Date: 2008–11–01
  7. By: Padli, Jaharudin; Habibullah, M.S.
    Abstract: The purpose of the present study is to investigate the relationship between disaster fatalities with the level of economic development, years of schooling, land area and population for a panel of fifteen Asian countries over the sample period over 1970 to 2005. Our results indicates that the relationship between disaster losses and the level of economic development is nonlinear in nature suggesting that at lower income level, a country is more disaster resilience but at higher income level, an economy become less disaster resistant. Other disaster determinants of interest is the level of education which suggests that educational attainment reduces human fatalities as a result of disaster; larger population will increase death toll and larger land area will reduce disaster fatalities. 1. INTRODUCTION
    Keywords: natural disaster; Asian; Panel data analysis
    JEL: Q00 E00
    Date: 2008–10–15
  8. By: Baharom, A.H.; Habibullah, M.S.; Royfaizal, R. C
    Abstract: This study examines the role of trade openness and foreign direct investment in influencing economic growth in Malaysia during 1975-2005, using the Bounds testing approach suggested by Pesaran et al. (2001). The empirical results demonstrate that trade openness is positively associated and statistically significant determinant of growth, both in short run and the long run. The result also suggested that foreign direct investment is positively associated in the short run and negatively associated in the long run, both significantly. Besides these two variables, the other control variable namely exchange rate is also significant in the short run as well as in the long run.
    Keywords: trade openness; foreign direct investment; economic growth; Malaysia
    JEL: F10 F43
    Date: 2008–10–17
  9. By: Alvaro Calzadilla; Katrin Rehdanz; Richard S.J. Tol (Economic and Social Research Institute)
    Abstract: Water problems are typically studied at the farm-level, the river–catchment-level or the country-level. About 70% of irrigation water is used for agriculture, and agricultural products are traded internationally. A full understanding of water use is impossible without understanding the international market for food and related products, such as textiles. Based on the global general equilibrium model GTAP-W, we offer a method for investigating the role of green (rain) and blue (irrigation) water resources in agriculture and within the context of international trade. Since problems related to groundwater availability are getting more severe in the future, we analyze the impact of different water use options for 2025 where data is readily available. We run two alternative scenarios. The first, called water crisis scenario, explores a deterioration of current trends and policies in the water sector. The second scenario, called sustainable water use scenario, assumes an improvement in policies and trends in the water sector and eliminates groundwater overdraft worldwide, increasing water allocation for the environment. In both scenarios, welfare gains or losses are not only associated with changes in agricultural water consumption. Under the water crisis scenario, welfare not only rises for regions where water consumption increases (China, South East Asia and the USA). Welfare gains are considerable for Japan and South Korea, Southeast Asia and Western Europe as well. These regions benefit from higher irrigated production and lower food prices. Alternatively, under the sustainable water use scenario, welfare losses not only affect regions where overdrafting is occurring. Welfare decreases in other regions as well. These results indicate that, for water use, there is a clear trade-off between economic welfare and environmental sustainability.
    Keywords: Agricultural Water Use, Computable General Equilibrium, Groundwater Use, Irrigation, Sustainable Water Use, Water Scarcity
    JEL: D58 Q17 Q25
    Date: 2008–12
  10. By: Baharom, A.H.; Habibullah, M.S.
    Abstract: This study examines the meaningful relationship between economic growth, and service sector contribution and domestic investment in two major Asian economies, namely India and China. Autoregressive Distributed Lag (ARDL) bounds testing procedure is employed to analyze the impact of the selected variables namely (1) contribution by the service sector, (2) (4) domestic investment on economic growth and vice versa. The period of interest is 1960-2005 using annual data. The empirical results demonstrate that for the case of India, there is (1) a unidirectional causality from domestic investment to economic growth and (2) from economic growth to services. As for China, only unidirectional causality from services sector to economic growth is detected, while no meaningful relationship was found between domestic investment and economic growth.
    Keywords: Service-led; investment-led; growth; China; India
    JEL: E22 E01
    Date: 2008–10–17
  11. By: Baharom, A.H.; Habibullah, M.S.
    Abstract: This paper examines the causality between income inequality and crime in Malaysia for the period 1973-2003. Autoregressive Distributed Lag (ARDL) bounds testing procedure is employed to (1) analyze the impact of income inequality on various categories of criminal activities as well as to (2) analyze the impact of various categories of criminal activities on income inequality. Interestingly our results indicate that income inequality has no meaningful relationship with any of the various categories of crime selected, such as total crime, violent crime, property crime, theft and burglary. Crime exhibits neither long-run nor short run relationships with income inequality and they are not cointegrated. It cannot be denied that there is ambiguity in the empirical studies of crime economics regarding various income variables leading to often mixed and contradicting results, which might be a good explanation of this finding.
    Keywords: Income inequality; crime; bounds testing; Malaysia
    JEL: E24 E00
    Date: 2008–09–10
  12. By: Habibullah, M.S.; Baharom, A.H.
    Abstract: Economists recognized that economic conditions have an impact on crime activities. In this study we employed the Autoregressive Distributed Lag (ARDL) bounds testing procedure to analyze the impact of economic conditions on various categories of criminal activities in Malaysia for the period 1973-2003. Real gross national product was used as proxy for economic conditions in Malaysia. Our results indicate that murder, armed robbery, rape, assault, daylight burglary and motorcycle theft exhibit long-run relationships with economic conditions, and the causal effect in all cases runs from economic conditions to crime rates and not vice versa. In the long-run, strong economic performances have a positive impact on murder, rape, assault, daylight burglary and motorcycle theft, while on the other hand, economic conditions have negative impact on armed robbery.
    Keywords: Bounds Testing; Malaysia; Crime
    JEL: E24 E00
    Date: 2008–10–12
  13. By: Steve Bradley; Jim Taylor; Giuseppe Migali
    Abstract: This paper estimates the impact of two flagship education policies, the Specialist Schools initiative and the Excellence in Cities programme, on the attainment of secondary school pupils in England. The focus is on their relative impact across gender, ethnic and socio-economic groups. Using pupil-level data, we find, first, that the EiC programme has been substantially more effective than the specialist schools initiative in raising the attainment of ethnic minority pupils, particularly Asians. Second, the Specialist Schools initiative has favoured pupils from economically advantaged families whereas the EiC programme has been more effective in raising the attainment of pupils from poor families. Third, both policies have been more effective for girls than for boys, thereby contributing to the educational gender gap.
    Keywords: Ethnicity, Gender, Test scores, Excellence in Cities, Specialist schools
    Date: 2008

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