nep-sea New Economics Papers
on South East Asia
Issue of 2009‒08‒30
seven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Economic Shocks and Exchange Rate as a Shock Absorber in Indonesia and Thailand By Goo, Siwei; Siregar, Reza Y. Siregar
  2. Determinants of International Bank Lending from the Developed World to East Asia By Siregar, Reza Yamora; Choy, KM
  3. Volatility spillover in Indonesia, USA, and Japan capital market By Mulyadi, Martin Surya
  4. VARMA models for Malaysian Monetary Policy Analysis By Mala Raghavan; George Athanasopoulos; Param Silvapulle
  5. Who Uses FTAs? By Hayakawa, Kazunobu; Hiratsuka, Daisuke; Shiino, Kohei; Sukegawa, Seiya
  6. Trade Impact Assessment (Trade SIA) of an EU-ASEAN Free Trade Agreement By Joseph Francois; Hanna Norberg; Miriam Manchin; Annette Pelkmans Balaoing
  7. Issues Affecting the Movement of Rural Labour in Myanmar: Rakhine Case Study By Okamoto, Ikuko

  1. By: Goo, Siwei; Siregar, Reza Y. Siregar
    Abstract: This study investigates the requirement for the exchange rate to be a shock absorber in Indonesia and Thailand from 1986 to 2007. In general, we find that the economic shocks have predominantly been asymmetric relative to the US and the Japanese economies. Yet, the weights attached to the US dollar remain respectably high in the exchange rate management of the rupiah and the baht, in particular for the latter currency, during the post-1997 crisis. Hence, relinquishing the role of exchange rate as a shock absorber has been costly during both the pre-and the post-1997 crisis periods for these Southeast Asian countries. Furthermore, it is arguably more costly for Thailand during the post-1997, and for Indonesia during the pre-1997 crisis.
    Keywords: Economic Shocks; Shock Absorber; Exchange Rate; Structural Vector Autoregression; Indonesia; Thailand
    JEL: E52 C22 F31
    Date: 2009–08–19
  2. By: Siregar, Reza Yamora; Choy, KM
    Abstract: The reversal of capital flows from the banking sector, rather than portfolio equity investment, has long been considered a main reason for the severity of the East Asian financial crisis of the late 1990s. This study analyzes the factors behind the boom and bust of bank lending, focusing on loans from private banks in seven OECD countries to nine East Asian economies during the 1990–2004 period. Our findings suggest that political instability and weaknesses in the legal, judicial, and bureaucratic systems help explain the continued stagnation in lending after the financial crisis. Thus, institutional reforms are critical for East Asia to successfully compete for international bank financing.
    Keywords: Foreign Bank Loans; East Asia; Gravity Model; Trade Intensity; Financial Risk; Law and Order; Bureaucratic Quality
    JEL: F34 F11 C23 G21
    Date: 2009–03–30
  3. By: Mulyadi, Martin Surya
    Abstract: Globalization and advanced information technology easing us for obtaining information from global stock markets. With that condition, volatility in domestic capital market could be affected by volatility from global stock markets. That concern will be answered in this research, about volatility spillover in Indonesia, USA, and Japan capital market. This research using daily return data from each country indices from January 2004 until December 2008 employing econometric model GARCH (1,1). The result showing us that there is one way volatility spillover between Indonesia and USA (USA effecting Indonesia). Meanwhile, there is bidirectional volatility spillover between Indonesia and Japan (Japan influnced Indonesia, and vice versa).
    Keywords: Volatility; Volatility Spillover; GARCH
    JEL: G14 G15
    Date: 2009–07
  4. By: Mala Raghavan; George Athanasopoulos; Param Silvapulle
    Abstract: This paper establishes vector autoregressive moving average (VARMA) models for Malaysian monetary policy analysis by efficiently identifying and simultaneously estimating the model parameters using full information maximum likelihood. The monetary literature is largely dominated by vector autoregressive (VAR) and structural vector autoregressive (SVAR).models, and to the best of our knowledge, this is the first paper to use VARMA modelling to investigate monetary policy. Malaysia is an interesting small open economy to study because of the capital control measures imposed by the government following the 1997 Asian financial crisis. A comparison of the impulse responses generated by these three models for the pre- and post-crisis periods indicates that the VARMA model impulse responses are consistent with prior expectations based on economic theories and policies pursued by the Malaysian government, particularly in the post-crisis period. Furthermore, uncovering the way in which various intermediate channels work would help Bank Negara Malaysia to steer the economy in the right direction so that monetary policy can still remain an effective policy measure in achieving sustainable economic growth and price stability.
    Keywords: VARMA models, Identification, Impulse responses, Open Economy, Transmission mechanism
    JEL: C32 E52 F41
    Date: 2009–08
  5. By: Hayakawa, Kazunobu; Hiratsuka, Daisuke; Shiino, Kohei; Sukegawa, Seiya
    Abstract: It is noted that utilization of AFTA is low by international standards. In order to clarify the reasons for such low utilization, this paper investigates what kinds of Japanese affiliates in ASEAN are more likely to use FTAs in their exporting, by employing unique affiliate-level data. Our findings are as follow. First, the larger the affiliate is, or the more diversified its procurements’ origins are, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates exporting actively to developing countries are more likely to use FTAs than those exporting to developed countries. Third, there are clear differences in FTA utilization depending on affiliates’ locations and sectors. These results afford a clue to the reasons for the low FTA utilization in East Asia.
    Keywords: FTA, Micro data, ASEAN, International trade, Regional economic cooperation, International economic integration
    JEL: F15 F53 O53
    Date: 2009–07
  6. By: Joseph Francois (Johannes Kepler University Linz); Hanna Norberg (Lund (School of Economics and Business) and IIDE); Miriam Manchin (University College London); Annette Pelkmans Balaoing (Erasmus University Rotterdam)
    Abstract: We analyze the effects of potential measures to liberalize trade between the European Union and ASEAN using a computable general equilibrium (CGE) model of world trade. The results on the whole point to positive effects for most of ASEAN under all scenarios, and small but positive effects over the long-run for the European Union. Throughout the study, some negative results are observed for other ASEAN countries (Brunei, Cambodia, Laos, and Myanmar). As expected, income and trade gains increase as liberalization deepens and as more dynamic effects are taken into account. The latter is particularly important for ASEAN, whose growth is often constrained by insufficient capital resources. In terms of income effects, the EU and Singapore gain the most, 51 and 78 percent of these gains, respectively, are due to the removal of the barriers to Services trade. It is Vietnam, however, that reaps the largest rise in GDP growth, while the EU, followed by Thailand, gains the most from the removal of non-tariff barriers. For the EU, about 87 percent of the income rise between these two scenarios is due to direct and indirect effects of trade facilitation alone. The productivity effects of an EU-ASEAN FTA are also visible in the form of higher wages both for skilled and unskilled workers. This is particularly important for ASEAN as this would mean that the employment increase in key growth sectors will outstrip the reduction of employment in contracting sectors. In terms of exports, the strong export performance of ASEAN projected here is largely driven by the export growth of ASEANÕs new members, i.e., Vietnam (35%), Cambodia, Laos & Myanmar (13%). There are negative effects for third countries, however. Indeed the net gains for most of ASEAN in the long-run are mirrored by comparable losses in third countries, much of which is carried by India and Pakistan. However, one must note that even in the scenario where the potential of trade diversion is the greatest, the effects are negative but rather trivial. Under the most ambitious trade liberalization scenario between the EU and ASEAN, it is PakistanÕs exports that are largely affected, with its exports falling by 2.4 percent. For the rest of the world, exports fall by just 0.05 percent, so that trade diversion effects can indeed be considered minimal.
    Keywords: CGE, EU-ASEAN Free Trade Area, GTAP
    JEL: F13 F15
    Date: 2009–08
  7. By: Okamoto, Ikuko
    Abstract: This paper presents issues affecting the movement of rural labour in Myanmar, by examining the background, purpose and earned income of labourers migrating to fishing villages in southern Rakhine. A broad range of socioeconomic classes, from poor to rich, farmers to fishermen, is migrating from broader areas to specific labour-intensive fishing subsectors, such as anchovy fishing. These labourers are a mixed group of people whose motives lie either in supplementing their household income or accumulating capital for further expansion of their economic activities. The concentration of migrating labourers with different objectives in this particular unstable, unskilled employment opportunity suggests an insufficiently developed domestic labour market in rural Myanmar. There is a pressing need to create stable labour-intensive industries to meet this demand.
    Keywords: Migration, Labour, Fishery, Migrant labor, Labor market
    JEL: J61 R23
    Date: 2009–07

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