nep-sea New Economics Papers
on South East Asia
Issue of 2009‒05‒30
six papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Determination of Inflation in an Open Economy Phillips Curve Framework: The Case of Developed and Developing Asian Countries By Pami Dua
  2. The Value of Cultural Heritage Sites in Southeast Asia - A Comparison of Values and Discussion of the Difficulties of Benefits Transfer By Tran Huu Tuan
  3. Testing for Financial Contagion with Applications to the Canadian Banking System By Fuchun Li
  4. Regional Monetary Units for East Asia: Lessons from Europe By Girardin Eric
  5. Village Funds and Access to Finance in Rural Thailand By Menkhoff, Lukas; Rungruxsirivorn, Ornsiri
  6. The Global Financial Crisis, LDC Exports and Welfare: Analysis with a World Trade Model By Willenbockel, Dirk; Robinson, Sherman

  1. By: Pami Dua
    Abstract: This paper investigates the determination of inflation in the framework of an open economy forward-looking as well as conventional backward-looking Phillips curve for eight Asian countries- Japan, Hong Kong, Korea, Singapore, Philippines, Thailand, China Mainland and India. Using Quarterly data and applying the instrumental variables estimation technique, it is found that the output gap is significant in explaining the inflation rate in almost all the countries. Furthermore, at least one measure of international competitiveness has a statistically significant influence on inflation in all the countries. The differences in the developed and developing world are highlighted by the significance of agriculture related supply shocks in determining inflation in the case of developing countries. For all countries, the forward-looking Phillips curve provides a better fit compared to the backward looking variant.[WP 178]
    Keywords: Inflation; Open Economy; Phillips Curve; Asian economies; inflation rate; supply shocks; monetary variables; demand factors; domestic factors; external factors; supply factors; devloping countries; developed countriesi
    Date: 2009
  2. By: Tran Huu Tuan (College of Economics, Hue University)
    Abstract: A large number of cultural heritage sites can be found in many countries of Southeast Asia. These sites attract an increasing number of tourists and income to these countries. Unfortunately, due to lack of money or resources to sufficiently protect these sites, many of them are in poor condition or deteriorating (Glover 2005; 2006; Tuan and Navrud 2007). Therefore, there is a need to put a price tag on these cultural heritages in order to justify the costs of preservation and conservation programs.
    Keywords: contingent valuation, choice experiment, cultural heritage, Thailand
    Date: 2008–06
  3. By: Fuchun Li
    Abstract: The author proposes a new test for financial contagion based on a non-parametric measure of the cross-market correlation. The test does not depend on the assumption that the data are drawn from a given probability distribution; therefore, it allows for maximal flexibility in fitting into the data. Simulation studies show that the test has reasonable size and good power to detect financial contagion, and that Forbes and Rigobon's test (2002) is conservative, suggesting that their test tends not to find evidence of contagion when it does exist. The author's new test is applied to investigate contagion from a variety of recent financial crises to the Canadian banking system. Three empirical results are obtained. First, compared to recent financial crises, including the 1987 U.S. stock market crash, 1994 Mexican peso crisis, and 1997 East Asian crisis, the ongoing 2007 subprime crisis has been having more persistent and stronger contagion impacts on the Canadian banking system. Second, the October 1997 East Asian crisis induced contagion in Asian countries, and it quickly spread to Latin American and G-7 countries. The contagion from the East Asian crisis to the Canadian banking system was not as strong or as persistent as that of the ongoing subprime crisis. However, it had a stronger impact on emerging markets. Third, there is no evidence of contagion from the 1994 Mexican peso crisis to the Canadian banking system. Contagion from that crisis occurred in Argentina, Brazil, and Chile, but the contagion effects of that crisis were limited to the Latin American region.
    Keywords: Financial stability; Central bank research; Econometric and statistical methods
    JEL: C12 G15
    Date: 2009
  4. By: Girardin Eric
    Abstract: This paper reports the European experience with a basket currency, the ECU. The ECU was initially introduced as a reference unit and later became the anchor of the European Monetary System. Public policy was complemented by private sector initiatives and use of the ECU for denomination of financial instruments. In practice, it turned out that a basket currency entails considerable unexpected technical complexities. There are no iron-clad economic principles and therefore there is some room for political considerations. In Europe three criteria were used for determining the weights: GDP shares, international trade shares, and financial market indicators. In addition, weights will change with exchange rate movements. Appreciating currencies will experience increasing weights and depreciating currencies decreasing weights. This may require a correction mechanism for political acceptability. In Europe, weights were rescaled by political authorities every five years. From an economic view point, weights depend critically on the purpose of the basket currency: is it a reference indicator, is it a currency for international transactions, or is it a parallel currency? Thus, before weights are to be discussed a clear vision of the role of the basket currency would be desirable. The vastly different growth performance among Asian economies also suggests a preference to forward rather than backward-looking measure. Turning then to the different functions of a basket currency, the use of basket currencies as a divergence indicator, or as a financial instrument in regional financial markets before elaborating a road map for the development of a basket currency in Asia is examined.[ DP 116]
    Keywords: Currency; Fixed Currency Unit; Monetary Unit; Basket Currency; Fixed Exchange Rate; Asian Currency Unit; European Currency Unit; Parallel Currency; Hard Currency Unit; Divergence Indicator; Short Maturities; Long Maturities; Cost-Benefit Analysis; Zero-Sum Game
    Date: 2009
  5. By: Menkhoff, Lukas; Rungruxsirivorn, Ornsiri
    Abstract: This paper examines whether recently introduced "village funds", one of the largest microfinance programs ever implemented, improve access to finance. Village funds are analyzed in a cross-sectional approach in relation to competing financial institutions. We find, first, that they reach the target group of lower income households better than formal financial institutions. Second, village funds provide loans to those kinds of borrowers which tend to be customers of informal financial institutions. Third, village funds help to reduce credit constraints. Thus, village funds provide services in the intended direction. However, they do this to a quite limited degree, questioning their efficiency.
    Keywords: informal financial institutions, microfinance, credit constraint, Thailand, Asia
    JEL: O16 O17 G21
    Date: 2009–05
  6. By: Willenbockel, Dirk; Robinson, Sherman
    Abstract: Changes in international trade flows and world prices are major channels through which the global financial crisis will hit developing countries. The recession in the ‘global North’ triggered by the financial crisis and the resulting slowdown of growth in China and other major emerging economies will generate declines in demand for exports from developing countries, along with a reversal of the beneficial terms-of-trade trends that have favoured net exporters of primary commodities over the last few years. How these trade shocks and terms-of-trade trends affect economic performance and welfare in low-income countries depends on country-specific characteristics and requires a differentiated analysis across countries. This study uses a multi-region computable general equilibrium (CGE) world trade model to gauge the impact of a slowdown in economic activity in the OECD on trade performance, world prices, and aggregate welfare in the rest of the world with a particular focus on the least developed countries (LDCs) in sub-Saharan Africa and Asia. The results of the simulation analysis indicate the degree of vulnerability of different developing countries and regions distinguished in the model to impacts arising from the recession via the trade channel.
    Keywords: Global financial crisis; terms of trade; recession
    JEL: C68 F17 F47
    Date: 2009–04

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