nep-sea New Economics Papers
on South East Asia
Issue of 2009‒03‒14
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The effect of a collective exchange rate adjustment on East Asian exports By Rahman, Mizanur; Kalirajan, Kaliappa
  2. Wissensbasierte Entwicklung in Singapur und Malaysia By Menkhoff, Thomas; Gerke, Solvay; Evers, Hans-Dieter; Chay, Yue Wah
  3. Aging in Asia: Trends,Impacts and Responses By Menon, Jayant; Melendez-Nakamura, Anna
  4. The impact of a common currency on East Asian production networks and China's exports behvior By Rahman, Mizanur
  5. Tiger, Tiger, Burning Bright? Industrial Policy Lessons from Ireland and East Asia for Small African Economies By David Bailey; Helena Lenihan; Ajit Singh
  6. Is there an incipient turnaround in Asia's"missing girls"phenomenon ? By Das Gupta, Monica; Chung, Woojin; Shuzhuo, Li
  7. International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence By Caporale, Guglielmo Maria; Hadj Amor, Thouraya; Rault, Christophe
  8. Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy By Wang, Wen-Yao; Hernandez-Verme, Paula
  9. Gravity with zeros: estimating trade potential of CIS countries By Oleksandr Shepotylo
  10. No more cutting class ? reducing teacher absence and providing incentives for performance By Rogers, F. Halsey; Vegas, Emiliana
  11. Human Capital vs Physical Capital: A cross country analysis of human development strategies By Siddiqui, Rizwana
  12. Transforming natural resource wealth into sustained growth and poverty reduction : a conceptual framework for Sub-Saharan African oil exporting countries By Toto Same, Achille
  13. Does Liberalisation cause more Electricity Blackouts? Evidence from a Global Study of Newspaper Reports By Yu, W.; Pollitt, M.G.
  14. Strategic Group Formation in the Mekong Delta - The Development of a Modern Hydraulic Society By Evers, Hans-Dieter; Benedikter, Simon
  15. Transformations of the State Variable and Learning Dynamics By Shurojit Chatterji; Ignacio Lobato

  1. By: Rahman, Mizanur; Kalirajan, Kaliappa
    Abstract: This paper estimates long-run effects of a collective exchange rate adjustment on multilateral exports from China, Japan, South Korea, and Taiwan. The findings show that a 1 percent generalized appreciation of all East Asian exchange rates would reduce East Asian exports by about 3 percent.
    Keywords: Global imbalance; exchange rate appreciation; collective adjustment; production networks; East Asia.
    JEL: F42 F32 F12 F14 C33
    Date: 2008–03–27
  2. By: Menkhoff, Thomas; Gerke, Solvay; Evers, Hans-Dieter; Chay, Yue Wah
    Abstract: This paper addresses the question how knowledge is used to benefit the economic development of Singapore and Malaysia. Both countries have followed strict science policies to establish knowledge governance regimes for a knowledge-based economy. On the basis of empirical studies in both countries we show, how ethnic and religious diversity impact on the ability to develop an epistemic culture of knowledge sharing and ultimately an innovative knowledge-based economy.
    Keywords: knowledge management; knowledge governance; development; ethnic diversity; Southeast Asia; Singapore; Malaysia
    JEL: R58 O2 D8
    Date: 2009–03–05
  3. By: Menon, Jayant (Asian Development Bank); Melendez-Nakamura, Anna (Asian Development Bank)
    Abstract: By the middle of this century, Asia's elderly population is projected to reach 922.7 million, and its share of population 17.5%, from just 4.1% in 1950. Within the next few decades, Asia is poised to become the oldest region in the world; reforming policies and creating new structures and institutions to address this challenge is a huge and complex undertaking that requires a big head-start. This paper analyzes the impact that aging is having in Asia, examines the policy options for dealing with the problems it is causing, and outlines how different sub-regions may require different responses.
    Keywords: Aging Asia; Asian demographic transition; Asian population trends; Asian population forecasts; aging impact
    JEL: J11 J14 J18
    Date: 2009–02–01
  4. By: Rahman, Mizanur
    Abstract: Vertical fragmentation of product value chain across borders is the driving force of growing economic interdependency in East Asia. A common currency, not flexible exchange rates between national currencies, would reduce flexibility in relative prices within East Asia. Its impact would be far greater for exports that have stronger production network linkage. In order to test the hypothesis, the paper estimates the effect of a common currency on China’s processing and ordinary exports separately. The distinction is necessary because the processing exports, unlike the ordinary exports, are produced along the regional production networks, with final stages of assembly and exporting being increasingly concentrated in China. The short-run dynamics indicate that the effect on China’s processing exports is more than double the corresponding effect on China’s ordinary exports. The long-run effect on the processing exports of intra-regional RER flexibility, which is otherwise the lack of a regional currency, is almost nine times as large as the long-run effect of a unilateral RMB appreciation. By contrast, the corresponding long-run effect is statistically insignificant for the case of ordinary exports that are produced primarily by using local inputs. The long-run coefficient of this intra-regional RER flexibility implies that the actual volume of processing exports is 20 percent below the potential. The magnitudes of these effects are consistent with the hypothesis that a common currency would further integrate East Asian production networks and promote regional economic integration.
    Keywords: Production networks; fragmentation of value chain; optimum currency area; common currency; exchange rate flexibility; China
    JEL: F15 F42 F32 F14 F33 C33
    Date: 2008–03–17
  5. By: David Bailey; Helena Lenihan; Ajit Singh
    Abstract: When comparisons in terms of industrial policy lessons to be learned have taken place, it has tended to be solely vis-a-vis the 'development state' East Asian experience. This paper broadens the analysis and considers lessons which African countries can learn fro other so-called 'tiger' economies including Ireland and the East and South Asian countries. The Irish model is relevant not least because of its emphasis on corporatism rather than simply relying on state direction in the operation of industrial policy. The Irish model is also more democratic in some senses and has protected workers' rights during the development process. Overall we suggest that some immediate actions are needed, notably with regard to the financial system in small African economies. Without such changes, a poorly functioning financial system will continue to keep investment at low levels. In relation to the small size of the African economies, the paper recommends regional integration and sufficient overseas development assistance (ODA) for infrastructural development.
    Keywords: industrial policy, developmental state, small African economies
    JEL: O1 O2
    Date: 2008–12
  6. By: Das Gupta, Monica; Chung, Woojin; Shuzhuo, Li
    Abstract: The apparently inexorable rise in the proportion of"missing girls"in much of East and South Asia has attracted much attention amongst researchers and policy-makers. An encouraging trend was suggested by the case of South Korea, where child sex ratios were the highest in Asia but peaked in the mid-1990s and normalized thereafter. Using census data, we examine whether similar trends have begun to manifest themselves in the two large populous countries of this region, China and India. The data indicate that child sex ratios are peaking in these countries, and in many sub-national regions are beginning to trend towards less masculinization. This suggests that, with continuing vigorous efforts to reduce son preference, the"missing girls"phenomenon could be addressed in Asia.
    Keywords: Population Policies,Gender and Law,Gender and Health,Adolescent Health,Disease Control&Prevention
    Date: 2009–02–01
  7. By: Caporale, Guglielmo Maria (Brunel University); Hadj Amor, Thouraya (University of Nice Sophia-Antipolis); Rault, Christophe (University of Orléans)
    Abstract: The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004, and carries out “second-generation” tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries.
    Keywords: emerging economies, real exchange rate, financial integration, misalignment, second-generation panel unit root and cointegration tests
    JEL: E31 F0 F31 C15
    Date: 2009–02
  8. By: Wang, Wen-Yao; Hernandez-Verme, Paula
    Abstract: We model a typical Asian-crisis-economy using dynamic general equilibrium techniques. Meaningful exchange rates obtain from nontrivial demands for fiat currencies. Sudden stops/bank-panics are possible, and key for evaluating the relative merits of alternative exchange rate regimes in promoting stability. Strategic complementarities contribute to the severe indeterminacy of the continuum of equilibria; there is a strong association between the scope for existence and indeterminacy of equilibria, the properties along dynamic paths and the underlying policy regime. Binding multiple reserve requirements reduce the scope for financial fragility and panic equilibria; backing the money supply acts as a stabilizer only in fixed regimes.
    Keywords: Sudden stops; Exchange rate regimes; Multiple reserve requirements
    JEL: E31 E44 F41
    Date: 2009–03–05
  9. By: Oleksandr Shepotylo (Kyiv School of Economics and Kyiv Economics Institute)
    Abstract: Arguably, the Commonwealth of Independent States (CIS) countries are not as integrated into the world markets as the EU countries or Southeast Asian countries. Trade flows of the CIS countries are not well diversified in terms of either trading partners or composition of exports. In order to compare the degree of export diversification of the CIS countries relative to other countries, we employ the gravity model that proved to be very successful in explaining geographical patterns of trade across countries. The gravity equation is estimated ‘out-of-sample’, meaning that we do not include data on trade flows of the CIS countries in the sample while calculating parameters of the gravity equation. Egger (2002) argued forcefully that the ‘in-sample’ estimation of the trade potential based on the deviation of residuals from the linear prediction is incorrect because large deviations of residuals in the gravity equation based on the in-sample method is not evidence of large deviations of trade from its potential, but rather an indicator of the model misspecification. In addition, we explicitly deal with the problems of zero trade flows and firm’s heterogeneity that become more severe at higher levels of disaggregation such as at the level of sectors of the economy.
    Keywords: Gravity model, trade potential, out-of-sample predictions
    JEL: F12 F14 F17
    Date: 2009–03
  10. By: Rogers, F. Halsey; Vegas, Emiliana
    Abstract: Expanding and improving basic education in developing countries requires, at a minimum, teachers who are present in the classroom and motivated to teach, but this essential input is often missing. This paper describes the findings of a series of recent World Bank and other studies on teacher absence and incentives for performance. Surprise school visits reveal that teachers are absent at high rates in countries such as India, Indonesia, Uganda, Ecuador, and Zambia, reducing the quality of schooling for children, especially in rural, remote, and poor areas. More broadly, poor teacher management and low levels of teacher accountability afflict many developing-country education systems. The paper presents evidence on these shortcomings, but also on the types of incentives, management, and support structures that can improve motivation and performance and reduce avoidable absenteeism. It concludes with policy options for developing countries to explore as they work to meet Education for All goals and improve quality.
    Keywords: Tertiary Education,Primary Education,Education For All,Teaching and Learning,Secondary Education
    Date: 2009–02–01
  11. By: Siddiqui, Rizwana
    Abstract: This study estimates a small simultaneous equation model using panel data from sixty-four countries for the years, 1996 and 2004. The model is estimated by various techniques - OLS, TSLS, dummy variable approach introducing variation at the regional level and fixed and random effect approaches introducing variation at the individual country level. The objective is to identify the importance of basic needs in human development strategies in Asia, Africa and rest of the world (ROW). The results show that income per capita has priority over basic need expenditure in development strategies of all regions despite quantitatively different. However, the importance of basic need expenditure cannot be denied in terms of capabilities development (improvement in health) that ultimately increases productivity.
    Keywords: Human capital; Physical capital; Income per capita; Basic needs Expenditures; Human Development
    JEL: O1 O15
    Date: 2008–08–05
  12. By: Toto Same, Achille
    Abstract: Oil and mineral revenues raise national savings and hence facilitate investment, capital accumulation, and sustained growth; thus, there are benefits of owning large natural resources. There can be a significant spillover effect from the oil sector to the non-oil sector particularly if governments are committed to bridge the infrastructure gap and promote the non-oil economy and foremost the non-oil tradable sector. Consequently, the capacity for coordinated policy formulation and execution is fundamental as well as sound windfall management mechanisms and institutions. This conceptual framework uses the case of Indonesia and the example of Norway to argue that the resource paradox is avoidable. Abundance should not be a curse, but rather a blessing for Sub-Saharan Africa's oil and mineral exporting countries. The country context and political economy matter a great deal but should not be the main driving forces behind windfall management, to avoid excessive rent-seeking activities, inefficiency, and wasteful spending. The EITI++ implementation can contribute to make a difference, mostly through capacity building, implementation assistance, and coordination support.
    Keywords: Economic Theory&Research,Debt Markets,Currencies and Exchange Rates,,Access to Finance
    Date: 2009–03–01
  13. By: Yu, W.; Pollitt, M.G.
    Abstract: There is a public perception that electricity liberalisation is the major cause of recent electricity blackouts. This is reflected in the newspaper reporting of blackouts. By contrast, it was not listed as a cause in any official investigation reports. In this paper, we examine the common causes of a number of large blackouts worldwide by applying the qualitative content analysis technique to different investigation reports. We generate a regional blackout dataset, spanning European, Latin American and Asian regions, by using news articles derived from the Factiva database. We use the random effects model and sample means techniques in a detailed examination of the effect of liberalisation and regional factors on the number of ‘small’ electricity blackouts between 1998 and 2007. The results indicate that, contrary to what we might expect, liberalisation does not have a significant statistical effect on the frequency of small blackouts. The perception that there is an increase in the number of blackouts after liberalisation seems to be shaped by the media’s reporting of individual ‘large’ incidents rather than the number of incidents reported.
    Keywords: power outage, electricity blackouts, liberalisation
    JEL: L15 L51 L94
    Date: 2009–03
  14. By: Evers, Hans-Dieter; Benedikter, Simon
    Abstract: The lower Mekong Delta, one of the largest river deltas in Asia, is a landscape shaped by the waters of the Mekong River that flows, as last part of its long way from the Tibetan Plateau to the South Chinese Sea, through a dense river and canal network in the Southwest of Vietnam. People in this area are, traditionally, exposed to a water-shaped environment and have lived for generations in adaptation to their natural surrounding without much human interference into the complex natural hydraulic system of the delta. However, this has changed dramatically during recent decades when hydraulic management started to become a key issue for the development of the lower Mekong Delta constantly, in particular with respect to the agricultural sector, which is the backbone of the delta’s economy. After the Second Indochinese War ended in 1975 the delta started to shift from human adaption to human control, transforming itself into what Wittfogel has described as a hydraulic society. This was mainly due to the new socialist government’s policy of rapid agricultural extension and growing endeavours in hydraulic management for fostering irrigated rice production. By now, in many places of the delta hydraulic works such as additional canals, dykes and sluices have been set up, constructed for regulating water flows. Technical innovations in hydraulic management and agricultural production have not only had significant impact on the delta’s environment and ecology, but also have triggered social transformation, in particular the appearance of new social groups struggling for access to resources and power. This paper intends to analyzes recent trends of social development and water management in the Mekong Delta from a scientific approach that is based on two social theories, firstly “strategic group analysis”, and secondly selected core aspects of Wittfogel’s social theory of “hydraulic society”. By presenting recently collected data, it is illustrated how the Mekong Delta has been transformed into a modern hydraulic society, in which certain strategic groups emerged as a consequence of growing activities in hydraulic management and agricultural-based economic growth. More specifically, the paper aims to give an overview of strategic group development in the delta by putting a strong focus on the process of forming a state bureaucracy of hydraulic management and the appearance of hydraulic construction companies as its clients. The paper shows how the strategic alliance between both groups has increased the chances for mutually appropriating government funds spent on hydraulic works and how this has caused ecologically and socially far-reaching impacts for the Mekong Delta.
    Keywords: Vietnam; Mekong Delta; strategic groups; hydraulic society; social transformation and power; water management; hydraulic bureaucracy
    JEL: D73 Q25 A14
    Date: 2009–02–10
  15. By: Shurojit Chatterji (Singapore Management University); Ignacio Lobato (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: This article studies dynamics in a model where agents forecast a one dimensional state variable via ordinary least squares regressions on the lagged values of the state variable. We study the stability properties of alternative transformations of the state variable that the agent can endogenously set forth. We study the consequences on the economy's stability of the typical transformations that an econometrician would attempt, such as differencing, detrending, or taking instantaneous concave transformations, such as logarithms. Surprisingly, for the considered class of economies, we found that these transformations are destabilizing, whereas alternative transformations, which an econometrician would never consider, such as convex transformations, are stabilizing. Therefore, we ironically find that in our set-up, an active agent, who is concerned about learning the economy's dynamics and, in an attempt to improve forecasting, transforms the state variable using the standard transformations, is more likely to deviate from the steady state than a passive agent.
    Date: 2009–01

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