nep-sea New Economics Papers
on South East Asia
Issue of 2010‒01‒23
nine papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Financial Markets in East Asia and Europe during the Global Financial Crisis By Johansson, Anders C.
  2. Savings, Investment and Current Account Surplus in Asia By Raghav Gaiha; Katsushi S. Imai; Ganesh Thapa; Woojin Kang
  3. At the frontier of practical political economy : operationalizing an agent-based stakeholder model in the World Bank's East Asia and Pacific Region By Nunberg, Barbara; Barma, Naazneen; Abdollahian, Mark; Green, Amanda; Perlman, Deborah
  4. Measuring gini coefficient of education: the Indonesian cases By Digdowiseiso, Kumba
  5. Capital Controls and 21st Century Financial Crises: Evidence from Colombia and Thailand By Bruno Coelho; Kevin Gallagher
  6. Ethnic Networks, Information, and International Trade: Revisiting the Evidence By Gabriel J. Felbermayr; Benjamin Jung; Farid Toubal
  7. A New Approach to Dealing With Negative Numbers in Efficiency Analysis: An Application to the Indonesian Banking Sector By Muliaman D. Hadad; Maximilian J. B. Hall; Wimboh Santoso; Karligash Kenjegalieva; Richard Simper
  8. "Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach" By Hooi Hooi Lean; Michael McAleer; Wing-Keung Wong
  9. A Gaussian Test for Cointegration By Gulasekaran Rajaguru; Tilak Abeysinghe

  1. By: Johansson, Anders C. (China Economic Research Center)
    Abstract: This paper analyzes equity market movements in East Asia and Europe during the global financial crisis. Extending the methodology in Chakrabarti and Roll (2002), we study regional as well as country-regional volatility, covariance and correlation. We also analyze regional and country-regional tail dependence in the two regions. The results show that volatility and covariance patterns in East Asia and Europe were relatively stable until the second half of 2008. Correlations were higher in Europe, but relatively high in East Asia as well. Both regions thus exhibit an overall increase in comovements compared to the time of the Asian financial crisis. There was a sharp decline in regional correlation during the third quarter of 2008 in both East Asia and Europe, which was then followed by a strong increase. The spread of the crisis affected Europe more, with resulting higher regional comovements. Moreover, average tail dependence stayed relatively stable in both regions throughout the pre-crisis and crisis periods with a notably higher level of tail dependence in Europe. Surprisingly, countries in East Asia such as China that are usually seen as insulated from the rest of the region show signs of increasing market integration with the rest of the region. The increasing level of financial market integration and the high level of comovements during times of international financial turmoil demonstrate the limited benefit of diversification in regional portfolios.
    Keywords: East Asia; Europe; Financial crisis; Financial integration; Correlation; Copula; Tail dependence
    JEL: F36 F41 G15
    Date: 2010–01–01
  2. By: Raghav Gaiha; Katsushi S. Imai; Ganesh Thapa; Woojin Kang
    Date: 2010
  3. By: Nunberg, Barbara; Barma, Naazneen; Abdollahian, Mark; Green, Amanda; Perlman, Deborah
    Abstract: Reform programs sometimes falter because they are politically infeasible. Policy change inevitably creates winners and losers, so those with vested interests strike bargains to determine how far and how quickly reform should advance. Understanding these micro political dynamics of reform can mean the difference between a successful intervention that gains political traction and a well-intentioned gambit that falls short of achieving its developmental objectives. Donors like the World Bank have been searching for ways to take these political factors more fully into account as they design programs to support country reforms. This initiative sought to introduce a rigorous and operationally usable political analysis tool that could be systematically integrated into the World Bank's country programming cycle. The East Asia and Pacific region carried out a multi-country pilot of the Agent-Based Stakeholder Model. This innovative analytical approach entails a quantitative simulation of the complex bargaining dynamics surrounding reform. The model anticipates stakeholder coalition formation and gauges the political feasibility of alternative proposed interventions. This paper provides a review of the Agent-Based Stakeholder Model pilot experience, exploring what sets this model apart from more traditional approaches, how it works, and how it fits into the Bank's operational cycle at various stages. An overview of the Mongolia, Philippines, and Timor-Leste country cases is followed by an examination of policy-related insights and lessons learned. Finally, the paper builds on this East Asian pilot experience, offering ideas on a potential way forward for organizations like the World Bank to deepen and extend their political analysis capabilities. The paper argues that the Agent-Based Stakeholder Model, utilized thoughtfully, offers a powerful addition to the practical political economy toolkit.
    Keywords: Banks&Banking Reform,Public Sector Corruption&Anticorruption Measures,Environmental Economics&Policies,Social Accountability,Corporate Law
    Date: 2010–01–01
  4. By: Digdowiseiso, Kumba
    Abstract: While income inequality in third world countries has aggressively been commented and studied extensively, little analysis is relatively available on measuring inequality in other dimensions of human development. The main findings suggest that inequality in education as measured by education Gini is negatively associated with average years schooling, implying that higher education attainments are more likely to achieve equality in education. Moreover, a clear pattern on an education Kuznets curve exists if standard deviation of schooling is used. Furthermore, gender gaps are related to education inequality and the relation between these variables become stronger over time.
    Keywords: Education; Inequality; Indonesia
    JEL: A20 I21
    Date: 2010–01–09
  5. By: Bruno Coelho; Kevin Gallagher
    Abstract: In the run up to the financial crisis of 2007-2009 many developing nations fell victim to massive inflows of capital, capital that their financial systems found difficult to absorb.  One of a number of policy options to respond to such inflows is unremunerated reserve requirements (URR).  Two countries, Colombia and Thailand, deployed URR in the second half of the decade.  This paper analyses the extent to which those URRs were successful in reducing the overall level and composition of capital inflows, reducing exchange rate appreciation and volatility, stemming asset bubbles, and granting more independence for monetary policy.  We find that URRs were modestly successful in Colombia and Thailand, though Thailand was less of a success than Colombia.  In Colombia the controls were able to reduce the overall volume of inflows and stem asset bubbles.  In Thailand, the URR did reduce the overall volume of flows, and the announcement of the URR caused a sharp drop in asset prices.  However, in both cases the controls were linked to exchange rate volatility and in Thailand asset prices recovered their upward trend the day after the announcement.  The results in this paper demonstrate that on the there is still a role for capital controls in the 21st century, but such controls should be more sophisticated than in years past. 
    Date: 2010
  6. By: Gabriel J. Felbermayr; Benjamin Jung; Farid Toubal
    Abstract: Influential empirical work by Rauch and Trindade (REStat, 2002) finds that Chinese ethnic networks of the magnitude observed in Southeast Asia increase bilateral trade by at least 60%. We argue that this estimate is upward biased due to omitted variable bias. Moreover, it is partly related to a preference effect rather than to enforcement and/or the availability of information. Applying a theory-based gravity model to ethnicity data for 1980 and 1990, and focusing on pure network effects, we find that the Chinese network leads to a more modest amount of trade creation of about 15%. Using new data on bilateral stocks of migrants from the World Bank for the year of 2000, we extend the analysis to all potential ethnic networks. We find, i.a., evidence for a Polish, a Turkish, a Mexican, or a Pakistani network. While confirming the existence of a Chinese network, its trade creating potential is dwarfed by other ethnic networks. The large heterogeneity in the trade-creating potential of different networks is, among other things, explained by the share of high-skilled immigrants, the degree of ethnic fragmentation, and GDP per capita.
    Keywords: Gravity model; international trade; network effects; international migration
    JEL: F12 F22
    Date: 2009–12
  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 one of the first stand-alone studies covering the whole of the Indonesian banking industry, and utilising a unique dataset provided by the Indonesian central bank, this paper analyses the levels of intermediation-based efficiency obtaining during the period 2003-2007. Using a new approach (i.e., semi-oriented radial measure Data Envelopment Analysis, or ‘SORM DEA’) to handling negative numbers (Emrouznejad et al., 2010) and combining it with Tone’s (2001) slacks-based model (SBM) to form an input-oriented, non-parametric SORM SBM model, we firstly estimate the relative average efficiencies of Indonesian banks, both overall, by group, as determined by their ownership structure, and by status (‘listed’/’Islamic’). For robustness, a range-directional (RD) model suggested by Silva Portela et al. (2004) was also employed to handle the negative numbers. In the second part of the analysis, we adopt Simar and Wilson’s (2007) bootstrapping methodology to formally test for the impact of size, ownership structure and status on Indonesian bank efficiency. In addition, we formally test the two models most widely suggested in the literature for controlling for bank risk – namely, those involving the inclusion of provisions for loan losses and equity capital respectively as inputs – to check the robustness of the results to the choice of risk variable. The results demonstrate a high degree of sensitivity of the average bank efficiency scores to the choice of methodology for handling negative numbers – with the RD model consistently delivering efficiency scores some 14% on average above those from the SORM SBM model – and to the choice of risk control variable under the RD model, but only a limited sensitivity to the choice of risk control variable under the SORM SBM model. With respect to group rankings, most model combinations find the ‘state-owned’ group to be the most efficient, with average overall efficiency levels ranging between 64% and 97%; while all model combinations find the ‘regional government-owned’ group to be the least efficient, with average overall efficiency levels ranging between 41% and 64%. As for the impact of bank ‘status’ on the efficiency scores, both the Islamic banks and the listed banks perform better than the industry average in the majority of model combinations. Finally, the results for the impact of scale on the efficiency scores are ambiguous. Under the RD model, and irrespective of the choice of risk control variable, size is very important in determining intermediation-based efficiency. Under the SORM SBM model, however, large banks’ performance is not significantly different from that of the medium-sized banks when equity capital is used as the risk control variable, although the medium-sized banks do out-perform small banks. Moreover, when loan loss provisions are used as the risk control variable, medium-sized banks are shown to significantly out-perform both large and small banks, with the large banks being the least efficient.
    Keywords: Indonesian Finance and Banking; Efficiency.
    JEL: C23 C52 G21
    Date: 2009–12
  8. By: Hooi Hooi Lean (School of Social Sciences, Universiti Sains Malaysia); Michael McAleer (Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute); Wing-Keung Wong (Department of Economics, Hong Kong Baptist University)
    Abstract: This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets.
    Date: 2010–01
  9. By: Gulasekaran Rajaguru (School of Business, Bond University, Australia); Tilak Abeysinghe (Department of Economics, National University of Singapore)
    Abstract: We use a mixed-frequency regression technique to develop a test for cointegration under the null of stationarity of the deviations from a long-run relationship. What is noteworthy about this MA unit root test, based on a variance-difference, is that, instead of having to deal with non-standard distributions, it takes the testing back to the normal distribution and offers a way to increase power without having to increase the sample size substantially. Monte Carlo simulations show minimal size distortions even when the AR root is close to unity and that the test offers substantial gains in power against near-null alternatives in moderate size samples. An empirical exercise illustrates the relative usefulness of the test further.
    Keywords: Null of stationarity, MA unit root, mixed-frequency regression, variance difference, normal distribution, power.
    JEL: C12 C22
    Date: 2009–12

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