nep-sea New Economics Papers
on South East Asia
Issue of 2009‒10‒24
eleven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. East Asian Exports in the Global Economic Crisis: The Decoupling Fallacy and Post-crisis Policy Challenges By Prema-chandra Athukorala; Archanun Kohpaiboon
  2. Financial Liberalisation and Stock Market Volatility: The Case of Indonesia By Gregory James; Michail Karoglou
  3. "Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns" By Tanchanok Khamkaew; Michael McAleer; Roengchai Tansuchat
  4. Reproductive Contributions of Foreign Wives in Taiwan: Similarities and Differences among Major Source Countries By Kao-Lee Liaw; Ji-Ping Lin; Chien-Chia Liu
  5. Socioeconomic Success and Health in Later Life: Evidence from the Indonesia Family Life Survey By Firman Witoelar; John Strauss
  6. The Tools of Transition: Education and Development in Modern Southeast Asian History By Tim Harper
  7. Productivity Changes in Indonesian Banking: Application of a New Approach to Estimating Malmquist Indices By Muliaman D. Hadad; Maximilian J. B. Hall; Wimboh Santoso; Karligash Kenjegalieva; Richard Simper
  8. Regional Economic Impacts of Cross-Border Infrastructure: A General Equilibrium Application to Thailand and Lao PDR By Warr, Peter; Menon, Jayant; Yusuf, Arief Anshory
  9. "A Simple Expected Volatility (SEV) Index: Application to SET50 Index Options" By Chatayan Wiphatthanananthakul; Michael McAleer
  10. The Current Economic Crisis: Causes, Cures and Consequences By Karl Aiginger
  11. Time-Varying Currency Betas: Evidence from Developed and Emerging Markets By Prabhath Jayasinghe; Albert K. Tsui

  1. By: Prema-chandra Athukorala; Archanun Kohpaiboon
    Abstract: This paper examines the export experience of East Asian economies in the aftermaths of the global financial crisis against the backdrop of pre-crisis trade patterns. The analysis is motivated by the ‘decoupling’ thesis, the notion that the East Asian region has become a self-contained economic entity with potential for maintaining its own growth dynamism independent of the economic outlook for the traditional developed market economies. The findings suggests that the East Asian trade integration story that underpinned the decoupling thesis is simply a statistical artifact and that there is little room for the East Asian countries for an integrated policy response that marks a clear departure from the pre-crisis policy stance favoring export-oriented growth.
    Keywords: East Asian trade, global economic crisis, decoupling thesis, China
    JEL: F01 F14 O53
    Date: 2009
  2. By: Gregory James (Dept of Economics, Loughborough University); Michail Karoglou (Business School, Newcastle University)
    Abstract: This paper examines the relationship between financial liberalisation and stock market volatility in Indonesia. By looking at the time series properties of the Jakarta Composite Index (JCI) we identify breaks in stock market volatility which coincide with the timing of major policy events. Our main findings are (i) a significant decrease in volatility after the "official" opening of the stock market to foreign participation; (ii) a significant increase in volatility in the year before market opening following reforms that eased entry requirements and the issuance of brokerage licenses; and (iii) a significant increase in volatility at the time of the Asian crisis followed by a significant decrease in the second and sixth years after the crisis.
    Keywords: financial liberalisation; stock market volatility; Indonesia; Asian crisis.
    JEL: G14 G15
    Date: 2009–09
  3. By: Tanchanok Khamkaew (Faculty of Economics, Maejo 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)
    Abstract: Asia is presently the most important market for the production and consumption of natural rubber. World prices of rubber are not only subject to changes in demand, but also to speculation regarding future markets. Japan and Singapore are the major futures markets for rubber, while Thailand is one of the world's largest producers of rubber. As rubber prices are influenced by external markets, it is important to analyse the relationship between the relevant markets in Thailand, Japan and Singapore. The analysis is conducted using several alternative multivariate GARCH models. The empirical results indicate that the constant conditional correlations arising from the CCC model of Bollerslev (1990) lie in the low to medium range. The results from the VARMA-GARCH model of Ling and McAleer (2003) and the VARMA-AGARCH model of McAleer et al. (2009) suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on conditional volatility. Finally, the DCC model of Engle (2002) suggests that the conditional correlations can vary dramatically over time. In general, the dynamic conditional correlations in rubber spot and futures returns shocks can be independent or interdependent.
    Date: 2009–10
  4. By: Kao-Lee Liaw; Ji-Ping Lin; Chien-Chia Liu
    Abstract: In light of the entrenchment of sub-replacement fertility and the sharp increase in the stock of foreign wives in Taiwan in recent years, this research studies the reproductive contributions of Taiwan’s foreign wives from the top five source countries (China, Vietnam, Indonesia, Thailand, and the Philippines), based mainly on an application of a multinomial logit model to the micro data of the 2003 census of foreign wives. Our main findings are as follows. First, the overall fertility level of the foreign wives was probably somewhat higher than that of the native-born women and definitely lower than the replacement level. Second, among the five nationalities, those from China were much less reproductive than those from the other countries, mainly because the former were more prone to (1) having a rather old marriage age, (2) having a very large spousal age gap, (3) being separated or divorced, (4) having their current marriage being their second marriage, and (5) having a veteran as the husband. Third, among the four Southeast Asian nationalities, those from Indonesia and the Philippines were more reproductive than those from Thailand and Vietnam. This contrast was a muted reflection of the fertility difference in countries of origin. Fourth, for every nationality, marriage duration and marriage age were the most powerful explanatory factors and must be included in the model to avoid getting misleading estimated coefficients of other less powerful explanatory factors, whereas current age was a spurious factor that should not be used in the model. Fifth, in the context of marriage duration and marriage age, the explanatory factors with rather strong explanatory powers for at least one nationality included spousal age gap, marital status, remarriage status, co-residence with parent, and wife’s employment status. Sixth, the expected negative effect of wife’s educational attainment on lifetime fertility turned out to be either non-existent or modest. In particular, it had practically no effect on the probability of being childless. These findings implied that getting better educated foreign wives could increase the quality of their children with little or no reduction in the number of their children and in their probability of being childless
    Keywords: ASEAN countries, China, international marriage, international migration, fertility, Taiwan
    JEL: J13
    Date: 2009–09
  5. By: Firman Witoelar; John Strauss
    Abstract: Indonesia has been undergoing a major health and nutrition transition over the past twenty or more years and there has begun a significant aging of the population as well. In this paper the authors focus on documenting major changes in the health of the population aged 45 years and older, since 1993. They use the Indonesia Family Life Survey (IFLS), a large-scale, broad-based panel survey of households and individuals, covering 4 full waves from 1993 to 2007/8. Much of the changes can be seen as improvements in health, such as the movement out of undernutrition and communicable disease as well as the increasing levels of hemoglobin. On the other hand, other changes such as the increase in overweight and waist circumference, especially among women, and continuing high levels of hypertension that seems to be inadequately addressed by the health system, indicate that the elderly population in Indonesia is increasingly exposed to higher risk factors that are correlated with chronic problems such as cardiovascular diseases and diabetes. In addition to documenting long-run changes in health and its distribution among the elderly Indonesian population, they examine correlations between socio-economic status, principally education and percapita expenditure, and numerous health outcome and behavioral variables.
    Date: 2009–09
  6. By: Tim Harper
    Abstract: Although great importance is attached to the role of education in national development in Southeast Asia, its role has been ambivalent. In the colonial period, education was a central way in which societies mobilised to challenge and resist European rulers. Yet education has also been the central vehicle through which colonial and post-colonial states have sought to impose their own visions and discipline their subjects. Southeast Asia’s history has been marked by a cultural willingness to borrow and adapt ideas, practices and institutions from outside. Yet this has also been a source of anxiety and conflict. The ‘indigenous’ is often a product of an immediate post-colonial history, rather than the expression of a longer cultural experience. Historians can try to provide a useful narrative of regional thinking about education and development in Southeast Asia, particularly during its key ‘periods of transition’, and thus help to set educational developments within in a wider context. Providing a historical perspective, this paper attempts to map some of the region’s capacities and capabilities, and to examine how adequately they have been exploited by the formal educational sector.
    Date: 2009
  7. By: Muliaman D. Hadad (Bank Indonesia, Jakarta, Indonesia); Maximilian J. B. Hall (Dept of Economics, Loughborough University); Wimboh Santoso (Bank Indonesia, Jakarta, Indonesia); Karligash Kenjegalieva (Dept of Economics, Loughborough University); Richard Simper (Dept of Economics, Loughborough University)
    Abstract: In this study, we utilise a new, non-parametric efficiency measurement approach which combines the semi-oriented radial measure data envelopment analysis (SORM DEA) approach for dealing with negative data (Emrouznejad et al., 2010) with the slacks-based efficiency measure of Tone (2001, 2002), to analyse efficiency and productivity changes for Indonesian banks over the period Quarter I 2003 to Quarter IV 2007. Using quarterly data based on supervisory data provided by Bank Indonesia we find that, under the intermediation-based approach to efficiency estimation, average Indonesian bank efficiency somewhat declined during the sample period, from 73% to 63%, reaching a nadir of 53% at end-June 2007. With respect to the bank groupings, Indonesian ‘state-owned’ banks were the most efficient at the beginning of the sample period (with average efficiency of 92%) but, by the end of the sample period, they had been usurped by the ‘joint-venture’ and ‘non-foreign exchange private’ banks. The regional government-owned banks were found to be the least efficient throughout. Finally, Malmquist results for the Indonesian banking industry suggest that the main driver of productivity growth is technological progress. A strategy based on the gradual adoption of newer technology, according to our results, thus seems to have the highest potential for boosting the productivity of the financial intermediary operations of Indonesian banks.
    Keywords: Indonesian Finance and Banking; Productivity; Efficiency.
    JEL: C23 C52 G21
    Date: 2009–09
  8. By: Warr, Peter (Australian National University); Menon, Jayant (Asian Development Bank); Yusuf, Arief Anshory (Padjadjaran University)
    Abstract: A general equilibrium framework is used in this paper to study the regional economic effects of infrastructure improvements designed to reduce the costs of cross-border inter-regional trade. The analysis focuses on the economic benefits from the Second Mekong International Bridge between Mukdahan Province in Thailand and Savannakhet Province in the Lao People's Democratic Republic. The results suggest that in the short-run, the kind of transport cost reductions that are consistent with improvement of inter-regional transport facilities will produce a modest increase in inter-regional trade volumes in both directions and a small increase in real consumption in both regions. Over a longer period of time, the economic benefits to both regions are very much larger, as investors respond to the changed structure of incentives with new capital investments, and as workers move to regions of greater return to their labor. The results do not confirm the common presumption that the benefits from cross-border infrastructure projects occur only, or overwhelmingly, in the richer region.
    Keywords: Cross-border infrastructure; general equilibrium; Thailand; Lao PDR
    JEL: D58 I32 R40
    Date: 2009–10–01
  9. By: Chatayan Wiphatthanananthakul (Faculty of Economics,Chiang Mai University and Chulachomklao Royal Military Academy); 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)
    Abstract: In 2003, the Chicago Board Options Exchange (CBOE) made two key enhancements to the volatility index (VIX) methodology based on S&P options. The new VIX methodology seems to be based on a complicated formula to calculate expected volatility. In this paper, with the use of Thailand's SET50 Index Options data, we modify the apparently complicated VIX formula to a simple relationship, which has a higher negative correlation between the VIX for Thailand (TVIX) and SET50 Index Options. We show that TVIX provides more accurate forecasts of option prices than the simple expected volatility (SEV) index, but the SEV index outperforms TVIX in forecasting expected volatility. Therefore, the SEV index would seem to be a superior tool as a hedging diversification tool because of the high negative correlation with the volatility index.
    Date: 2009–09
  10. By: Karl Aiginger (WIFO)
    Abstract: The financial crisis has brought about an economic recession which is more severe and widespread than any decline in production in the past 50 years. In the USA and Europe the decline in production over the entire economy was however much less than during the Great Depression of the 1930ies. Only in manufacturing has the decline in some quarters of 2008-09 been similarly sharp. This time, however, the economic policy makers reacted differently. The high income levels at the start of the crisis and the social systems in place were able to cushion the fall. The roots of the crisis are not only to be found in the financial sector but also in macroeconomic imbalances, in regulation failures and insufficient policy coordination. Previous experience shows that the length of the crisis will be different for the financial markets, for the housing sector, for production and for employment, and that recovery could be slow, bumpy and fragile. Different approaches of economic policy are being systematically compared and we already discuss how the crisis can actually be turned into an opportunity. One even dares to suggest that some of the elements of the European Model (long-term orientation, stakeholder model) could serve as an example to the world, even if the crisis management in Europe is not without fault, and despite the fact that in the USA and China economic policy is reacting more decisively. It is necessary to coordinate European policy more closely internally as well as with those of the USA and of the dynamic economies of neighbouring countries and Asia in order to avoid further crises, and proactively to tackle worldwide problems such as climate change, and raw materials and food shortages.
    Date: 2009–08–24
  11. By: Prabhath Jayasinghe (Department of Economics, National University of Singapore); Albert K. Tsui (Department of Economics, National University of Singapore)
    Abstract: This paper examines the conditional time-varying currency betas from five developed markets and four emerging markets. A trivariate BEKK-GARCH-in-mean model is used to estimate the timevarying conditional variance and covariance of returns of stock index, the world market portfolio and changes in bilateral exchange rate between the US dollar and the local currency of each country. It is found that currency betas are more volatile than those of the world market betas. Currency betas in emerging markets are more volatile than those in developed markets. Moreover, we find evidence of long-memory in currency betas. The usefulness of time-varying currency betas are illustrated by two applications.
    Keywords: time-varying currency betas; multivariate GARCH-M models; international CAPM; fractionally integrated processes; stochastic dominance
    JEL: C22 F31 F37 G12 G15
    Date: 2009–10

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