nep-sea New Economics Papers
on South East Asia
Issue of 2009‒11‒14
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The role of bond finance in firms' survival during the Asian crisis By Marina-Eliza Spaliara; Serafeim Tsoukas
  2. Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis By McKibbin, Warwick J.; Chanthapun, Waranya Pim
  3. Roads for Asian Integration: Measuring ADB's Contribution to the Asian Highway Network By Madhur, Srinivasa; Wignaraja, Ganeshan; Darjes, Peter
  4. South Asian Free Trade Area: Implications for Bangladesh By Hossain, Sharif M.
  5. Food Insecurity and Its Determinants in Asia and the Pacific By Southgate, Douglas; Coxhead, Ian
  6. Global and Regional Spillovers in Emerging Stock Markets: A Multivariate GARCH-in-Mean Analysis By John Beirne; Guglielmo Maria Caporale; Marianne Schulze-Ghattas; Nicola Spagnolo
  7. The end of ‘lowest-low’ fertility? By Joshua R. Goldstein; Tomáš Sobotka; Aiva Jasilioniene
  8. Geographic oil concentration and economic growth – a panel data analysis By Nuno Torres; Óscar Afonso; Isabel Soares
  9. Extreme Dependence in International Stock Markets By Cathy Ning
  10. Global integration of European tuna markets By Ramòn Jiménez-Toribio; Patrice Guillotreau; Rémi Mongruel
  11. Second Quarter Review of Monetary Policy 2009 -10 By D Subbarao
  12. When Are Analyst Recommendation Changes Influential? By Loh, Roger K.; Stulz, Rene M.
  13. Uniform Topologies on Types By Yi-Chun Chen; Alfredo Di Tillio; Eduardo Faingold; Siyang Xiong

  1. By: Marina-Eliza Spaliara (Dept of Economics, Loughborough University); Serafeim Tsoukas (Dept of Economics, Nottingham University)
    Abstract: In this paper we assess the effects of bond financing on firms' survival during the 1997-98 Asian crisis. Using a novel database covering the period 1995 to 2007 for five Asian economies most affected by the crisis - Indonesia, Korea, Malaysia, Singapore and Thailand - we find strong evidence that the Asian crisis affected both directly and indirectly (through interactions with financial indicators) the probability of survival. More importantly, we show that bond issuers, irrespective of the currency denomination, are more likely to survive compared to non-issuers. Nevertheless, only firms issuing bonds in local currency are shielded from the adverse effects of the crisis.
    Date: 2009–11
  2. By: McKibbin, Warwick J. (Australian National University); Chanthapun, Waranya Pim (Australian National University)
    Abstract: Rising economic integration in Asia and periodic volatility in global and national financial markets raise the issue of the optimal degree and form of monetary cooperation among Asian economies. There is a large literature on the benefits and costs of monetary cooperation, however, less can be found with a specific focus on Asia. A number of studies have explored whether Asia might form an optimal currency area, although these have focused on the nature of shocks, in particular business cycle correlations, as well as the extent of trade linkages among economies. Less has been done on the impact of portfolio shifts and financial shocks, and how these shocks impact on financial cooperation. <p> This paper has two goals. The first is to explore the impacts of the current global financial crisis on Asian economies under existing monetary and exchange rate arrangements. The second is to explore how alternative forms of cooperation and exchange rate regimes might change the economic outcomes in Asia. In particular, the paper explores the impact of current regimes compared to one of three hypothetical regimes: (i) all countries peg to the US dollar, (ii) all Asian economies are in an Asian Currency Union with an Asian Central Bank setting policy, or (iii) floating exchange rates with each central bank in Asia independently choosing optimal time-consistent, close-loop policy rules to target a loss function consisting of deviation in inflation and output growth from desired levels.
    Keywords: Monetary cooperation; exchange rates; financial crisis
    JEL: E27 E42 E44 E52 E58 F41 F42
    Date: 2009–10–01
  3. By: Madhur, Srinivasa (Asian Development Bank); Wignaraja, Ganeshan (Asian Development Bank); Darjes, Peter (Asian Development Bank)
    Abstract: Against the backdrop of growing momentum for regional cooperation and integration (RCI) in Asia, this paper examines the link between regional roads and Asian Development Bank (ADB) support between 1966 and 2008. The novel methodology used in this paper includes an Asia-wide definition of regional roads that fall on the Asian Highway (AH) network. The AH network is a system of about 140,000 kilometers (km) of standardized roads crisscrossing many Asian countries and with linkages to Europe. The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) conducts research on Asian roads and works with member countries to identify financing sources for AH network development. In relation to assessing ADB's contribution to regional roads, three tasks are attempted in this paper: (i) an identification of ADB-financed regional roads and other kinds of roads in ADB's portfolio, (ii) an estimation of ADB's contribution to the AH network, and (iii) the development of a map where ADB’s contribution to regional road construction and infrastructure can be easily juxtaposed with the AH network. The paper finds that regional highways have been a notable and growing part of ADB's road portfolio since the 1990s, particularly in ADB’s subregional programs such as the Greater Mekong Subregion (GMS) and Central Asia Regional Economic Cooperation (CAREC) programs. It also finds that ADB road investment has made a significant contribution to the AH network, representing about two thirds of the network’s core roads. While parts of the AH network have been completed, substantial gaps still exist, including an estimated $43.8 billion required for priority projects. As part of its mandate to promote better integration of Asian infrastructure, ADB may have a role to play in addressing the financing, planning, and institutional development of the AH network. Furthermore, strengthened coordination among ADB, UNESCAP, and other actors can enhance both the AH network and the process of regional road development in Asia.
    Keywords: Asian highway; regional roads; regional cooperation; infrastructure development; multilateral development bank
    JEL: F15 N75 R42
    Date: 2009–11–01
  4. By: Hossain, Sharif M.
    Abstract: The current thesis has analyzed the impact of South Asian Free Trade Area (SAFTA) on Bangladesh in terms of export generation within member countries. A standard gravity model has been used to analyze Bangladesh’s export potential using cross section data. From the estimated result, it is observed that Bangladesh has huge export potential to South Asia in general, and India in particular. If SAFTA agreement is properly implemented then Bangladesh’s exports within this region would be much higher than the estimated potential export. In terms of imports, Bangladesh has exceeded its potential level. Therefore, the expected increase in import by Bangladesh from SAFTA member countries might not be as large as the expected increase in export. But it should be mentioned that the expected results can only be achieved by free trade in real sense i.e. goods and services can move freely across countries without any tariff and non-tariff barriers.
    Keywords: SAFTA; Gravity Model; Bangladesh’s Export Potential
    JEL: F1
    Date: 2009–07
  5. By: Southgate, Douglas (Ohio State University); Coxhead, Ian (University of Wisconsin)
    Abstract: In Asian-Pacific developing countries, the prevalence of food insecurity has diminished dramatically in the past generation. Despite this, many millions continue to suffer from persistent or periodic food insecurity. The causes of food insecurity are both structural and market-related, including influences of public policy on market operations. The most vulnerable populations are those that simultaneously experience both these forms of insecurity. The places they inhabit tend to have poor-quality land, are exposed to climatic and other environmental risks, or both. These same populations either have relatively weak links with the non-food economy, in which higher wages and better income-earning opportunities make food self-sufficiency less important, or are prevented from accessing opportunities in the non-food economy because of poor or misguided policies.
    Date: 2009–04
  6. By: John Beirne; Guglielmo Maria Caporale; Marianne Schulze-Ghattas; Nicola Spagnolo
    Abstract: This paper examines global (mature market) and regional (emerging market) spillovers in local emerging stock markets. Tri-variate VAR GARCH(1,1)-in-mean models are estimated for 41 emerging market economies (EMEs) in Asia, Europe, Latin America, and the Middle East. The models capture a range of possible transmission channels: spillovers in mean returns, volatility, and cross-market GARCH-in-mean effects. Hypotheses about the importance of different channels are tested. The results suggest that spillovers from regional and global markets are present in the vast majority of EMEs. However, the nature of cross-market linkages varies across countries and regions. While spillovers in mean returns dominate in emerging Asia and Latin America, spillovers in variance appear to play a key role in emerging Europe. There is also some evidence of cross-market GARCH-in-mean effects. The relative importance of regional and global spillovers varies too, with global spillovers dominating in Asia, and regional spillovers in Latin America and the Middle East.
    Keywords: Volatility spillovers, contagion, stock markets, emerging markets
    JEL: F30 G15
    Date: 2009
  7. By: Joshua R. Goldstein (Max Planck Institute for Demographic Research, Rostock, Germany); Tomáš Sobotka (Max Planck Institute for Demographic Research, Rostock, Germany); Aiva Jasilioniene (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Period fertility rates fell to previously unseen low levels in a large number of countries beginning in the early 1990s. The persistence of Total Fertility Rates under 1.3 raised the possibility of dramatic, rapid population aging as well as population decline. In an analysis of recent trends, we find, however, a widespread turn-around in so-called “lowest-low” fertility countries. The reversal has been particularly vigorous in Europe. The number of countries with period total fertility rates less than 1.3 fell from 21 in 2003 to five in 2008, of which four (Hong Kong, Korea, Singapore and Taiwan) are in East Asia. Moreover, the upturn in the period TFR was not confined to lowest-fertility countries, but affected the whole developed world. We explore the demographic explanations for the recent rise in fertility stemming from fertility timing effects as well as economic, policy, and social factors. Although the current economic crisis may push down fertility in the short-run, we conclude that formerly lowest-low fertility countries should continue to see further increase in fertility as the transitory effects of shifts to later motherhood become less and less important.
    JEL: J1 Z0
    Date: 2009–11
  8. By: Nuno Torres (Faculdade de Economia, Universidade do Porto); Óscar Afonso (CEFUP, OBEGEF and Faculdade de Economia, Universidade do Porto); Isabel Soares (CEFUP, Faculdade de Economia, Universidade do Porto)
    Abstract: Given a panel of oil producing countries, we show that a higher oil concentration is associated with an increase in economic growth through capital efficiency in: (i) countries with medium and low income per head from East Asia & Pacific and Latin America & the Caribbean, classified as followers in terms of technology-convergence clubs; (ii) countries with high income inequality. In our view, the overall results reflect the broader scope for factor efficiency increases in less developed countries arising from the oil industry, which is characterised by a highly globalised know-how.
    Keywords: Energy; Economic growth; Panel data
    JEL: C23 O13 O47 O50 Q40
    Date: 2009–11
  9. By: Cathy Ning (Department of Economics, Ryerson University, Toronto, Canada)
    Abstract: This paper investigates the structure and degree of extreme dependence in international equity markets using carefully selected tools from the theory of copulas. We examine both the static and dynamic dependence via unconditional and conditional copulas. We find significant asymmetric tail dependence in equity markets, with the overall larger lower tail dependence than upper tail dependence. Moreover, in Europe and East Asia but not in North America, the extreme dependence is time-varying in both its structure and degree. Our results also indicate a higher intra-continental than inter-continental tail dependence. Our findings have important implications in global risk management strategies.
    Keywords: Copulas; Tail dependence; Time varying dependence; International financial markets; Risk diversification.
    JEL: C14 C51 G15 G32
    Date: 2009–11
  10. By: Ramòn Jiménez-Toribio (MEMPES- AEA - university of Huelva - University of Huelva, Spain); Patrice Guillotreau (IRD - Institut de Recherche pour le Développement - Institut de Recherche pour le Développement et la société); Rémi Mongruel (UMR Amure - ifremer - IFREMER)
    Abstract: This paper evaluates the degree of integration between the world market and the major European marketplaces of frozen and canned tuna through both vertical and horizontal price relationships. Spatial linkages are investigated horizontally in order to estimate the connection between the European market and the world-wide market on the primary tage of the value chain. One of the key results is the high level of market integration at the exvessel stage, and the price leadership of yellowfin tuna over skipjack tuna. The same approach is applied at the ex-factory level. Basically, the European market for final goods appears to be segmented between the Northern countries consuming low-priced canned skipjack tuna imported from Asia (mainly Thailand) and the Southern countries (Italy, Spain) processing and importing yellowfin-based products sold at higher prices. France appears to be an intermediate market where both products are consumed. The former market is found to be well integrated to the world market and can be considered to be competitive, but there is a suspicion of market power being exercised on the latter. Price relationships are therefore tested vertically between the price of frozen tuna paid by the canneries and the price of canned fish in both Italy and France. The two species show an opposite pattern in prices transmission along the value chain: price changes along the chain are far better transmitted for the “global” skipjack tuna than for the more European” yellowfin tuna. The results are discussed, along with their implications for the fishing industry.
    Date: 2009
  11. By: D Subbarao
    Abstract: The repo rate has been kept unchanged at 4.75%. The reverse repo rate left steady at 3.25%. The bank rate has been retained unchanged at 6.0%. The cash reserve ratio (CRR) of scheduled banks has been retained unchanged at 5% of their net demand and time liabilities (NDTL). Statutory liquidity ratio (SLR) for scheduled commercial banks has been hiked by 100 basis points to 25%.
    Keywords: repo, reverse, cash reserve ratio, CRR, SLR, statutory liquidity ratio, demand, liabilities, commercial banks, scheduled, banks, Financial Stability, interest rate, trade, emerging market economies (EMEs), Asia, capital, India, china
    Date: 2009
  12. By: Loh, Roger K. (Singapore Management University); Stulz, Rene M. (Ohio State University and ECGI)
    Abstract: Not all stock recommendation changes are equal. In a sample constructed to minimize the impact of confounding news, relatively few analyst recommendation changes are influential in the sense that they impact investors’ beliefs about a firm in a way that could be noticed in that firm’s stock returns. More than one-third of the stock-price reactions to analyst recommendation changes have the wrong sign and only approximately 10% have significant stock-price reactions at the 5% level using an extended market model. We find that the probability of an influential recommendation is higher for leader analysts, star analysts, away-from-consensus revisions, revisions issued contemporaneously with earnings forecasts, analysts with greater relative experience, and those with more accurate earnings estimates. Growth firms, small firms, high institutional ownership firms, and high prior turnover firms are also more likely to have influential stock recommendations. Strikingly, analyst recommendations are more likely to be influential after Reg FD and the settlement. Finally, influential recommendations are associated with increases in stock volatility and large absolute changes in consensus earnings forecasts.
    JEL: G14 G20 G24
    Date: 2009–05
  13. By: Yi-Chun Chen (Dept. of Economics, National University of Singapore); Alfredo Di Tillio (IGIR and Dept. of Economics, Universita Luigi Bocconi); Eduardo Faingold (Cowles Foundation, Yale University); Siyang Xiong (Dept. of Economics, Rice University)
    Abstract: We study the robustness of interim correlated rationalizability to perturbations of higher-order beliefs. We introduce a new metric topology on the universal type space, called uniform weak topology, under which two types are close if they have similar first-order beliefs, attach similar probabilities to other players having similar first-order beliefs, and so on, where the degree of similarity is uniform over the levels of the belief hierarchy. This topology generalizes the now classic notion of proximity to common knowledge based on common p-beliefs (Monderer and Samet (1989)). We show that convergence in the uniform weak topology implies convergence in the uniform strategic topology (Dekel, Fudenberg, and Morris (2006)). Moreover, when the limit is a finite type, uniform-weak convergence is also a necessary condition for convergence in the strategic topology. Finally, we show that the set of finite types is nowhere dense under the uniform strategic topology. Thus, our results shed light on the connection between similarity of beliefs and similarity of behaviors in games.
    Keywords: Rationalizability, Incomplete information, Higher-order beliefs, Strategic topology, Electronic mail game
    JEL: C70 C72
    Date: 2009–10

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