nep-sea New Economics Papers
on South East Asia
Issue of 2010‒02‒20
eight papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity By Sato, K.; Zhang, Z.; McAleer, M.J.
  2. Asia Confronts the Impossible Trinity By Ila Patnaik; Ajay Shah
  3. Export Diversification and Economic Growth in Malaysia By Arip, Mohammad Affendy; Yee, Lau Sim; Abdul Karim, Bakri
  4. Trust, discrimination and acculturation Experimental evidence on Asian international and Australian domestic university students By Daniel Ji; Pablo Guillen
  5. Further Comments on The Impact of the Asian Miracle on the Theory of Economic Growth By Robert W. Fogel
  6. Remittances and Household Behavior in the Philippines By P. Ang, Alvin; Sugiyarto, Guntur; Jha, Shikha
  7. Labor Supply Responses to the 1990s Japanese Tax Reforms By Ken Yamada
  8. Global financial architecture: Past and present arguments, advice, action By Ashima Goyal

  1. By: Sato, K.; Zhang, Z.; McAleer, M.J. (Erasmus Econometric Institute)
    Abstract: In this paper we use a structural VAR model with block exogeneity to investigate if external shocks originating from the USA played a dominant role in influencing the macroeconomic fluctuations in East Asia during the period 1978-2007. The empirical results show a dynamic effect of external shocks, implying that, even though regional integration appears to be deepening and accelerating, especially after the recent global financial crisis, the influence of US shocks on real output fluctuations in the East Asian region is still very strong. The effects of Chinese shocks show an increasing trend over time, but the impacts are still small and not comparable with those of US shocks. The world oil price shock has become increasingly important in influencing the stability of real output growth in the region. The results from variance decomposition and impulse response analysis confirm the findings. Even though Japanese firms have established production networks in East Asia through trade and investment, and China has also grown rapidly and become a key regional country, the results suggest that US influence in the region is still asymmetric and strong. Therefore, it is difficult to conclude that shocks to the East Asian economies have become more regionally oriented.
    Keywords: structural vector autoregression;block exogeneity;monetary union;external shocks;East Asia
    Date: 2010–02–08
  2. By: Ila Patnaik; Ajay Shah
    Abstract: Capital account openness and exchange rate flexibility in 11 Asian countries are examined. Asia has made slow progress on de jure capital account openness, but has made much more progress on de facto capital account openness. While there is a slow pace of increase in exchange rate flexibility, most Asian countries continue to have largely inflexible exchange rates. This combination { of moving forward with de facto capital account integration without bringing in exchange rate flexibility { has lead to procyclicality of monetary policy when capital flows are procyclical. The paper emphasizes the case for a consistent monetary policy framework. [NIPFP WP No. 2010-64].
    Keywords: Korea, capital, account, monetary policy, Asian countries, Asia, China, defacto, exchange rate flexibility, de jure, India, industrial countries, Chinn-Ito measure,
    Date: 2010
  3. By: Arip, Mohammad Affendy; Yee, Lau Sim; Abdul Karim, Bakri
    Abstract: This paper examines the relationship between export diversification and economic growth in Malaysia. We use annual data from 1980-2007 and time-series techniques of cointegration and Granger causality tests to examine the long-run relationship and dynamic interactions among the variables. The results show the presence of a unique cointegrating vector among the four variables. Consistent with previous studies, we found that export diversification plays significant roles to economic growth in Malaysia. This finding suggests that, in order to sustain future economic growth under the static effect of multilateral and regional trade liberalization, Malaysia should diversify its export commodities and develop greater social and economic cooperation with the rest of the world. As an export-oriented economy, in the long run, export diversification strategy could help stabilizing Malaysia’s export earnings.
    Keywords: export diversification; economic growth; revealed comparative advantage
    JEL: F10 C30
    Date: 2010–02–09
  4. By: Daniel Ji (Federal Reserve Bank of Australia); Pablo Guillen (The University of Sydney)
    Abstract: Intercultural relations between Australia and Asia are pivotal to the economic prosperity of the Asia-Pacific region. However, there appears to be tension between Australian domestic and Asian international students at universities in Australia. To measure the degree of trust and patterns of discrimination between these groups, the Berg, Dickhaut and McCabe (1995) trust game and a series of control games were used in framework where each participant played each game against several partners. Controlling for individual heterogeneity, domestic students significantly discriminated against international students in the trust game, and individual discrimination was preference-based rather than based on beliefs towards international students’ trustworthiness. Moreover, the degree of in-group favouritism shown by domestic students was negatively correlated with the Big Five personality trait of Openness. Intercultural patterns across the games also pointed to a willingness of international students to build relations with domestic students. However, the average amount that they sent in the trust game was negatively related with the number of semesters studied at university in Australia, which may partly reflect cultural adjustment but also institutional disadvantages faced specifically by international students. The study furthers understanding of the patterns of discrimi-nation between domestic and international university students, the nature of this discrimination, and illustrates the extent of challenges faced by the Australian tertiary education sector.
    Keywords: rust, discrimination, intercultural differences, economic experiments
    Date: 2010–01–01
  5. By: Robert W. Fogel
    Abstract: This paper addresses three issues related to the relative rates of growth in the United States, the European Union, and China during the four decades between 2000 and 2040. The first concerns the source of the factors which make it likely that China will continue to grow at a high rate for another generation. The paper argues that this growth will be the result of both favorable economic and political conditions. The second concerns the source of declining GDP growth in the original fifteen nations of the European Union. For these countries, the underlying cause is due in large measure to low fertility rates and an increase in the dependency ratio. The third issue is the projection of long-term U.S. growth in GDP at a rate of 3.7 percent per annum.
    JEL: F47 O53
    Date: 2010–02
  6. By: P. Ang, Alvin (University of Santo Tomas); Sugiyarto, Guntur (Asian Development Bank); Jha, Shikha (Asian Development Bank)
    Abstract: As one of the world’s largest recipients of remittances, the Philippines received remittances roughly 12% of its gross domestic product in 2008. Remittances have become the single most important source of foreign exchange to the economy and a significant source of income for recipient families. Using the instrument variable estimation technique, this study examines the role of remittances in increasing household consumption and investment and thereby their potential for rebalancing economic growth and creating long-term human and capital investment. The results indicate that remittances negatively influence the share of food consumption in the total expenditure. However, unlike previous studies, the estimations show that remittances to the Philippines do not have a significant influence on other key items of consumption or investment such as spending on education and health care. A further analysis using logistical regression shows that remittances help to lift households out of poverty. Remittances thus may help in fighting poverty in the Philippines but not in rebalancing growth, especially in the long run.
    Keywords: Remittances; migrants; household consumption; investment; poverty; Philippines
    Date: 2009–12
  7. By: Ken Yamada (School of Economics, Singapore Management University)
    Abstract: The consumption-leisure choice model implies that an exogenous change in tax rates will bring about a change in labor supply. This implication is expected to be important to labor supplied by secondary earners under a progressive tax system when spousal income alters effective marginal tax rates. This paper examines labor supply responses to the income tax changes associated with Japanese tax reforms during the 1990s. Empirical specications are presented in a way that is consistent with a life-cycle model of consumption and labor supply. A simple solution is applied to the sample-selection problem in panel data models with endogenous regressors. The results indicate that the hours-of-work elasticity with respect to the net-of-tax rate is 0.8 for married women.
    Keywords: Labor Supply Elasticity, Intertemporal Labor Supply Model, Sample-Selection Correction Model, Quasi-Experiment, Tax Reforms
    Date: 2004–02
  8. By: Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: In the context of the formation of G-20, the paper points out the absence of reform in the global financial architecture (GFA) after the East Asian crisis, and assesses factors that can improve the chances of real reform this time. A factual assessment of various causes advanced for the global crisis, puts the main responsibility on lax regulation. Liquidity created by current account imbalances was tiny compared to endogenous amplification of liquidity in the financial sector. Emerging markets needed reserves as self-insurance in the face of volatile cross border flows. Even so global imbalances increase risk. The paper summarizes the Chimerica debate and the blocks that have stalled progress in resolving the issue. It argues that symmetric and balanced reform, at individual country and international level, is required to remove the blocks. Deeper governance reforms will make it feasible. Potential contributions of the G-20 are outlined. It is argued that India is a useful example of flexible but managed exchange rates that allowed market deepening and export growth.
    Keywords: Global Financial architecture, Crisis, G-20, Imbalances, Over-saving
    JEL: F02 F32 F33
    Date: 2009–06

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