nep-sea New Economics Papers
on South East Asia
Issue of 2009‒08‒22
eight papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The day of the week effects in Indonesia, Singapore, and Malaysia stock market By Anwar, Yunita; Mulyadi, Martin Surya
  2. A Window of Opportunity Opens: Asian and American Views of the International Economic Architecture By Wendy Dobson
  3. Trends and Patterns of Foreign Direct Investments In Asia: A Comparative Perspective By Prema-chandra Athukorala
  4. Border Trade and Economic Zones on the North-South Economic Corridor: Focusing on the Connecting Points between the Four Countries By Tsuneishi, Takao
  5. Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment By Aaditya Mattoo; Arvind Subramanian
  6. Trade Booms, Trade Busts, and Trade Costs By David S. Jacks; Christopher M. Meissner; Dennis Novy
  7. "Forecasting Volatility and Spillovers in Crude Oil Spot, Forward and Futures Markets" By Chia-Lin Chang; Michael McAleer; Roengchai Tansuchat
  8. Monetizing Housing Equity to Generate Retirement Incomes By Ngee-Choon Chia; Albert K C Tsui

  1. By: Anwar, Yunita; Mulyadi, Martin Surya
    Abstract: Efficient market stated that stock’s return is indifferent in each trading day. But, the day of the week effects phenomenon made a different return in each single day in a week. This is an abnormal return which can affect investor in deciding investment strategy, portfolio selection, and profit management. We are researching the day of the week effects in Indonesia, Singapore, and Malaysia stock markets in order to get the information whether this anomaly is exist or not at the three countries. We use AR-EGARCH econometric models to answer our objective. The result shows that there is positive abnormal return on Friday in Indonesia and Malaysia. However, there is no Friday positive abnormal return in Singapore. Besides, our study also concludes that there is no Monday negative abnormal return in all of three countries.
    Keywords: The day of the week effects; anomaly; abnormal return; AR-EGARCH
    JEL: G14
    Date: 2009–06
  2. By: Wendy Dobson (University of Toronto)
    Abstract: This paper compares US and Asian views of the international economic architecture including Asia’s evolving regional institutions. Lessons from the global financial crisis are used to assess reforms of the financial institutions better to prevent and manage future crises. While G20 leaders have increased the resources of the International Monetary Fund much work remains to restore its legitimacy and independence and to define clearly the Financial Stability Board’s mandate to strengthen financial oversight and regulation. The paper critiques proposals for a global super-regulator and concludes that while the global architecture is important, the tests of its success will be fewer government actions to self-insure and the willingness to heed warnings of future problems and take timely corrective actions.
    Keywords: global financial crisis; international economic architecture; IMF reform; WTO; Asian regionalism; regulatory reform
    JEL: F02 F13 F33 F59
    Date: 2009–08
  3. By: Prema-chandra Athukorala
    Abstract: This paper examines foreign direct investment (FDI) in developing Asia over the past three decades with emphasis on two key issues: the implications of the ongoing process of international production fragmentation and the alleged ‘crowding out’ effect of China’s rise as a major host to FDI on the other countries in the region. The evidence suggests that assembly processes within vertically integrated global industries (in particularly, electrical goods and electronics) has gained prominence over the past two decades as the major area of attraction for foreign investors in the region. Contrary to the popular crowding out fear, China’s rise as a major assembly centre within global production networks seems to have added further dynamism to region-wide MNE operations in the regions. A key policy inference from our analysis is that, in designing policies of outward-oriented development, investment and trade policies must be considered together as co-determinants of the location of production and patterns of trade.
    Keywords: FDI, production fragmentation, developing Asia, China
    JEL: F21 F23 O53
    Date: 2009
  4. By: Tsuneishi, Takao
    Abstract: The North-South Economic Corridor (NSEC), the road between Bangkok and Kunming, China, including the Laos route (R3B) and the Myanmar route (R3B), has been developed since 1998 following the GMS program. The region covering Yunnan Province in China, Shan State in Myanmar, Northern Laos and Northern Thailand has historical and ethnic closeness, and is a comparatively poor mountainous, boundary area. In the wake of the development of the NSEC, however, the region has started to show signs of change. Consequently, a review is to be carried out concerning the movement of people and cars, border trade and the situation concerning the progress of border economic zones at the five nodal border points in the four countries, and over three routes: R3A, R3B, and the Mekong River route.
    Keywords: GMS, Economic corridor, Border trade, Border economic zone, Quadrangle economic zone, Golden triangle, R3A, R3B, Mekong River, CBTA, Asia, China, Myanmar, Laos, Thailand, International trade, Regional economic cooperation
    JEL: F15 O53 R11
    Date: 2009–07
  5. By: Aaditya Mattoo (; Arvind Subramanian (Peterson Institute for International Economics)
    Abstract: This paper documents an unusual and possibly significant phenomenon: the export of skills embodied in goods, services, or capital from poorer to richer countries. We first present a set of stylized facts. Using a measure that combines the sophistication of a country’s exports with the average income level of destination countries, we show that the performance of a number of developing countries, notably China, Mexico, and South Africa, matches that of much more advanced countries, such as Japan, Spain, and the United States. Creating a new combined dataset on foreign direct investment (FDI) (covering greenfield investments as well as mergers and acquisitions) we show that flows of FDI to Organization for Economic Cooperation and Development (OECD) countries from developing countries like Brazil, India, Malaysia, and South Africa as a share of their GDP are as large as flows from countries like Japan, Korea, and the United States. Then, taking the work of Hausmann et al. (2007) as a point of departure, we suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, we find that a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether development benefits might derive not from deifying comparative advantage but from defying it.
    Keywords: Uphill flows, foreign direct investment, finance, sophisticated goods, exports, services, growth, comparative advantage, mergers and acquisitions, greenfield investment
    JEL: F1 F2 F4 O4
    Date: 2009–09
  6. By: David S. Jacks; Christopher M. Meissner; Dennis Novy
    Abstract: What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs.
    JEL: F15 N70
    Date: 2009–08
  7. By: Chia-Lin Chang (Department of Applied Economics, National Chung Hsing University); Michael McAleer (Econometric Institute, Erasmus School of Economics Erasmus University Rotterdam and Tinbergen Institute and Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics, University of Tokyo); Roengchai Tansuchat (Faculty of Economics, Maejo University and Faculty of Economics, Chiang Mai University)
    Abstract: Crude oil price volatility has been analyzed extensively for organized spot, forward and futures markets for well over a decade, and is crucial for forecasting volatility and Value-at- Risk (VaR). There are four major benchmarks in the international oil market, namely West Texas Intermediate (USA), Brent (North Sea), Dubai/Oman (Middle East), and Tapis (Asia- Pacific), which are likely to be highly correlated. This paper analyses the volatility spillover effects across and within the four markets, using three multivariate GARCH models, namely the CCC, VARMA-GARCH and VARMA-AGARCH models. A rolling window approach is used to forecast the 1-day ahead conditional correlations. The paper presents evidence of volatility spillovers and asymmetric effects on the conditional variances for most pairs of series. In addition, the forecasted conditional correlations between pairs of crude oil returns have both positive and negative trends.
    Date: 2009–08
  8. By: Ngee-Choon Chia (Department of Economics, National University of Singapore); Albert K C Tsui (Department of Economics, National University of Singapore)
    Abstract: The public housing program and the unique way of financing housing through the mandatory savings system in Singapore have created a class of homeowners. This paper compares the instruments available to different flat owners to monetize their assets, including the Lease Buyback Scheme (LBS), subletting, downsizing and reverse mortgage. We estimate the present value of retirement incomes derived from these options by incorporating the survival probability which is forecasted using the Lee-Carter demographic model. We compare the monthly payouts that can be unlocked and discuss the tradeoffs of adequate retirement with the elderly preference for leaving a bequest and ageing in place. Our results show that LBS is the most attractive option. It allows the elderly to age-inplace while generating a steady stream of monthly drawdown and possibility of leaving a bequest. Subletting releases housing equity while retaining the asset. This helps the elderly to fulfill their bequest motive. Reverse mortgage is the least attractive option, yielding the lowest retirement income due to high loading factors.
    Date: 2009–07

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