nep-sea New Economics Papers
on South East Asia
Issue of 2010‒05‒02
nineteen 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. Migration in the Asia-Pacific Region: Trends, factors, impacts By Philip Martin
  3. Crises in Asia: Recovery and Policy Responses By Hong, Kiseok; Tang, Hsiao Chink
  4. Cross-border Mergers and Acquisitions (M&As) in Developing Asia: The Role of Financial Variables By Rabin Hattari; Ramkishen S. Rajan
  5. Volatility Co-movement of ASEAN-5 Equity Markets By Oh, Swee-Ling; Lau, Evan; Puah, Chin-Hong; Abu Mansor, Shazali
  7. Internal Migration, Selection Bias and Human Development: Evidence from Indonesia and Mexico By Partha Deb; Papa Seck
  8. Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia By Chia-Lin Chang; Thanchanok Khamkaew; Michael McAleer
  9. A Simple Expected Volatility (SEV) Index: Application to SET50 Index Options By Michael McAleer; Chatayan Wiphatthanananthakul
  10. Xenophobia, International Migration and Human Development By Jonathan Crush; Sujata Ramachandran
  11. Domestic fuel price and economic sectors in Malaysia: a future of renewable energy? By Jee, Hui-Siang Brenda; Lau, Evan; Puah, Chin-Hong; Abu Mansor, Shazali
  12. Foreign Ownership and Employment Growth in Indonesian Manufacturing By Sjöholm, Fredrik; Lipsey, Robert E.; Sun, Jing
  13. Does a Leapfrogging Growth Strategy Raise Growth Rate? Some International Evidence By Wang, Zhi; Wei, Shang-Jin; Wong, Anna
  14. The Living Conditions and Well-being of Refugees By Bart de Bruijn
  15. The Global Crisis: Fatal Decisions - Four Case Studies in Financial Regulation By Leo F. Goodstadt
  16. A model for determining whether a firm should exercise multiple real options individually or simultaneously By Michi Nishihara
  17. Capital Controls and Monetary Policy in Developing Countries By Juan Antonio Montecino; Jose Antonio Cordero
  18. Prospects of economic cooperation in the Bangladesh, China, India and Myanmar region: A quantitative assessment By Md. Tariqur Rahman; Muhammad Al Amin
  19. Alternative Technical Efficiency Measures: Skew, Bias, and Scale By Qu Feng; William C. Horrace

  1. By: Marina-Eliza Spaliara (Loughborough University); Serafeim Tsoukas (University of Nottingham, Hong Kong Institute for Monetary Research)
    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.
    Keywords: Bond Financing, Financial Crisis, Firm Survival, East Asia
    JEL: F32 F34 G15 L20
    Date: 2010–02
  2. By: Philip Martin (Department of Agricultural and Resource Economics, University of California, Davis)
    Abstract: This paper provides a comprehensive assessment of international migration in the Asia-Pacific region and reviews internal migration in China. After putting Asia-Pacific migration in a global context, it reviews trends in migration and the impacts of migrants in the major migrantreceiving countries, patterns of migration and their development impacts in migrant-sending countries, the human development impacts of migration, and three policy issues, viz, new seasonal worker programs for Pacific Islanders in New Zealand and Australia, required local sponsorship of foreigners in the Gulf countries, and the economic effects of migrants in the US and Thailand. Recent trends in internal migration in China, which shares attributes of international migration because of the hukou (household registration) system, are also assessed.
    Keywords: International labor migration, migrant workers, guest workers, Asia
    JEL: O1 O15 J0 F22
    Date: 2009–08
  3. By: Hong, Kiseok (Ewha Womans University); Tang, Hsiao Chink (Asian Development Bank)
    Abstract: The goal of this paper is to provide stylized facts on recovery from economic downturns and to evaluate the role of macroeconomic policies in promoting recovery. In particular, we examine gross domestic product (GDP) recessions and financial downturns (credit contractions and stock price declines) using data from 21 Organisation for Economic Co-operation and Development (OECD) economies and 21 developing Asian economies. We find, in general, recovery from a GDP recession in Asian economies is somewhat slower than in OECD economies. However, recovery from a financial downturn is not much different between Asian and OECD economies. We also find OECD economies have been more active and effective in using counter-cyclical policies than Asian economies in the face of GDP recessions and financial downturns. Recent evidence, however, suggests Asian economies may have better success in the current global crisis.
    Keywords: Recession; Financial Crisis; Recovery; Policy Response; Asia
    JEL: E20 E30 E32
    Date: 2010–04–01
  4. By: Rabin Hattari (World Bank); Ramkishen S. Rajan (George Mason University ,Hong Kong Institute for Monetary Research)
    Abstract: This paper examines cross-border M&A activities in a large panel which includes many developing Asian economies. How important are financial drivers of M&As in the region, particularly financial risks such as market risk, credit risk, and liquidity risk? How significant are intra-(developing) Asian M&As and are there differences between intra-regional M&A transactions and M&A purchases by extra-regional sources in developing Asia? These are among the issues explored in this paper using a novel dataset of bilateral M&A purchases in developing Asia over the period 2000-2007.
    Keywords: Developing Asia, Distance, Finance, Foreign Direct Investment (FDI), Gravity Model, Greenfield investment, Mergers and Acquisitions (M&As), Risks
    JEL: F21 F23 F36
    Date: 2009–12
  5. By: Oh, Swee-Ling; Lau, Evan; Puah, Chin-Hong; Abu Mansor, Shazali
    Abstract: Purpose – Economic cross-linkages and the increased co-movement of asset prices across international markets are important outcomes as the result of globalization. Hereby, the nature of international stock markets and the extent to which the 1997-1998 East Asian turmoil had affected the market relationship of five countries of Association of Southeast Asian Nations (ASEAN-5) remain as probing questions. Design/methodology/approach – We resort to the standard time series econometrics analysis. These include the unit root, cointegration and the Granger causality tests. Hereby, further empirical analyzes is conducted upon two sub-periods of interest: (1) pre-crisis period from 1987:1 to 1997:7 and (2) post-crisis period from 1997:8 to 2007:12. This is to allow for possible transitional motion leading to and departing from the crisis. Findings – Using an array of econometrics analysis upon the stock price volatility series, we found partial market integration for the pre-crisis; whereas in the post-crisis, complete integration prevails. Hence, the financial meltdown in 1997 is said to be a contagion led crisis as markets integrate well off after the crisis than prior to it. Nonetheless, long run portfolio asset diversification benefits across the ASEAN-5 basin are reduced as markets are integrated in both the pre- and post-crisis. Originality/value – The paper is of value by showing to uncover the issue of interdependence of stock market integration focusing on the ASEAN-5 economies. The formation of the ASEAN Investment Area (AIA- 1998) parallel with the establishment of a developed ASEAN Index-Financial Times Stock Exchange (FTSE) regional index is viable to foster deeper regional market convergence.
    Keywords: ASEAN-5; Portfolio Diversification; Volatility co-movement
    JEL: C32 G15 C22
    Date: 2010–04–03
  6. By: James B. Ang; Jakob B. Madsen
    Abstract: Using data for six Asian miracle economies over the period from 1953 to 2006, this paper examines the extent to which growth has been driven by R&D and tests which second-generation endogenous growth model is most consistent with the data. The results give strong support to Schumpeterian growth theory but only limited support to semi-endogenous growth theory. Furthermore, it is shown that R&D has played a key role for growth in the Asian miracle economies.
    JEL: O30 O40
    Date: 2010–02
  7. By: Partha Deb (Department of Economics, Hunter College and the Graduate Center, City University of New York); Papa Seck (Human Development Report Office, United Nations Development Programme)
    Abstract: The aim of this paper is to measure the returns to migration using non-experimental data taking both observed and unobserved characteristics into account. A significant challenge related to migration research and the issues of unobserved heterogeneity is that the standard 2stage least squares estimator (2SLS) is strictly only applicable to situations with linear and continuous treatment and outcomes, both of which are not appropriate for models of migration and many outcomes of interest. Furthermore, migration is not always a binary process given that people migrate to city or non-city locations and some migrants do return. Introducing these multinomial treatment effects means that one cannot rely on standard 2SLS methods. Using panel data from Indonesia (Indonesia Family Life Survey—IFLS) and Mexico (Mexican Family Life Survey— MxFLS) and applying non-linear instrumental variable (Heckman’s treatment effects model) and maximum simulated likelihood models, we measure the impacts of migration on a broad range of variables that include socio economic outcomes such as consumption, nutrition, health status and emotional well-being for adult household members and health and schooling outcomes for children. We find consistent results for both countries that point to significant trade-offs related to migration. We found that migration can greatly improve socio-economic status through increases in income or consumption but can also be detrimental to the health status and emotional well-being of migrants and/or their extended families.
    Keywords: Migration, selection, non-linear instrumental variables, consumption, socio-economic mobility, health, education
    JEL: O1 O15 C3 C8 F22
    Date: 2009–07
  8. By: Chia-Lin Chang; Thanchanok Khamkaew; Michael McAleer (University of Canterbury)
    Abstract: This paper analyzes the responsiveness of Thai outbound tourism to East Asian destinations, namely China, Hong Kong, Japan, Taiwan and Korea, to changes in effective relative price of tourism, total real total tourism expenditure, and one-off events. The nonlinear and linear Almost Ideal Demand (AID) models are estimated with monthly data to identify the price competitiveness and interdependencies of tourism demand for competing destinations in both long run (static) and short run error correction (dynamic) specifications. The homogeneity and symmetry restricted long run and short run AID models are estimated to calculate elasticities. The income elasticities, and the compensated and uncompensated own-price and cross-price elasticities, provide useful information for public and private tourism agents at the various destinations to maintain and improve price competitiveness. The empirical results show that price competitiveness is important for tourism demand for Japan, Korea and Hong Kong in the long run, and for Hong Kong and Taiwan in the short run. With regard to long run cross-price elasticities, the substitution effect can be found in the following pairs of destinations: China-Korea, Japan-Hong Kong, Taiwan-Hong Kong, Japan-Korea, and Taiwan-Korea. In addition to the substitution effect, the complementary effect can be found in the following pairs of destinations: China-Hong Kong, China-Japan, China-Taiwan, Japan-Taiwan, and Korea-Hong Kong. Contrary to the findings obtained from the long run AID specification, Japan-Korea and Taiwan-Korea are complements in the short run. Furthermore, the real total tourism expenditure elasticities indicate that China’s share of real total tourism expenditure is inelastic in response to a change in real total tourism expenditure, while Korea’s share of real total tourism expenditure is most sensitive to changes in expenditure in the long run. The greatest impact on the share of real total tourism expenditure in the short run is tourism demand for Taiwan.
    Keywords: Almost Ideal Demand (AID) model; tourism demand; price competitiveness; compensated prices; uncompensated prices; substitutes; complements; budget shares; error correction; monthly frequency
    JEL: C3 C5 D12 L83
    Date: 2010–04–01
  9. By: Michael McAleer (University of Canterbury); Chatayan Wiphatthanananthakul
    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 VIX formula to a very 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.
    Keywords: Financial markets; model selection; new products; price forecasting; time series; volatility forecasting
    Date: 2010–03–01
  10. By: Jonathan Crush (Southern African Migration Project (SAMP) and Southern African Research Centre (Queen’s University)); Sujata Ramachandran (Southern African Migration Project (SAMP))
    Abstract: In the continuing discussion on migration and development, the vulnerability of all migrant groups to exploitation and mistreatment in host countries has been highlighted along with an emphasis on protecting their rights. However, xenophobia has not yet received explicit attention although anti-migrant sentiments and practices are clearly on the rise even in receiving countries in developing regions. Despite gaps in existing empirical work, research and anecdotal evidence exposes pervasive forms of discrimination, hostility, and violence experienced by migrant communities, with the latter becoming easy scapegoats for various social problems in host countries. This study attempts to insert xenophobia in this debate on migration and development by examining the growth of this phenomenon in host countries in the South. It provides short accounts of xenophobia witnessed in recent times in five countries including South Africa, India, Malaysia, Libya, and Thailand. The ambiguity surrounding the concept is discussed and crucial features that define xenophobia are outlined. A variety of methods to study it are likewise identified. Using a wide range of examples from diverse contexts, the paper explores possible reasons for the intensification of xenophobia. The final sections of the paper briefly outline the developmental consequences of rampant xenophobia for migrant and host populations while examining policy options to tackle it.
    Keywords: Xenophobia; anti-immigrant prejudice; violence; intolerance; social exclusion; discrimination; migrant vulnerability; policy; South Africa, India, Libya, Thailand, Malaysia
    JEL: O1 O15 Z1 F22
    Date: 2009–09
  11. By: Jee, Hui-Siang Brenda; Lau, Evan; Puah, Chin-Hong; Abu Mansor, Shazali
    Abstract: This study empirically examines the relation between the domestic fuel prices with the ten disaggregated economic sectors in Malaysia with the spanning of data from 1990:Q1 to 2007:Q4. We found that only three sectors (agriculture, trade and other services sectors) are cointegrated with the fuel price and fuel price does Granger cause these sectors. Despite the evidence of non-cointegrated in most of the economic sectors, fuel price able to influence these sectors over a longer period. Policy recommendation from this study includes the utilization of the renewable energy (RE) as a strategic plan is the long-term solution due to the high dependency and increasing demand of energy. While energy prices have experienced some correction in response to signs of slower global growth, sufficient government enforcement and support need to be established to facilitate successful renewable energy implementation in Malaysia.
    Keywords: Fuel price; Economic sector; Granger causality; Renewable Energy; Growth
    JEL: C32 E31 O53
    Date: 2010–01–24
  12. By: Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN)); Lipsey, Robert E. (NBER); Sun, Jing (City University of New York)
    Abstract: Many developing countries would like to increase the share of modern or formal sectors in their employment. One way to accomplish this goal may be to encourage the entrance of foreign firms. They are typically relatively large, with high productivity and good access to foreign markets, and might therefore be better at creating jobs than domestic firms are. However, previous research on the issue has been limited by the paucity of long data sets for firm operations. We examine employment growth in Indonesia in a large panel of plants between 1975 and 2005, and especially in plants taken over by foreign owners from domestic ones. Employment growth is relatively high in foreign-owned establishments, although foreign firms own relatively large domestic plants, which in general grow more slowly than smaller plants. For plants that change the nationality of ownership during our period, we find a strong effect of shifts from domestic to foreign ownership in raising the growth rate of employment, but no significant effects of shifts from foreign to domestic ownership. The faster growth of employment in the foreign-owned plants in general is concentrated in the takeovers, especially in the year of acquisition. Foreign takeover of a domestically-owned plant, on average, brings a large immediate expansion of employment.
    Keywords: Foreign Direct Investment; Employment; Indonesia; Acquisitions
    JEL: F23 J21 J23
    Date: 2010–04–26
  13. By: Wang, Zhi (United States International Trade Commission (USITC)); Wei, Shang-Jin (Columbia University); Wong, Anna (University of Chicago)
    Abstract: While openness to trade is a well-recognized hallmark of the Asian growth model, another component of the model is a leapfrogging strategy—the use of policies to guide industrial structural transformation ahead of a country's factor endowment. Does the leapfrogging strategy work? Opinions vary but the evidence is scarce in part because it is more difficult to measure the degree of leapfrogging than the extent of trade openness. We undertake a systematic look at the evidence both across countries and subregions within a large regional Asian economy to assess the efficacy of such a strategy. We conclude that there is no strong and robust evidence that this strategy works reliably.
    Keywords: growth; trade openness; leapfrogging
    JEL: O20 O40
    Date: 2010–04–01
  14. By: Bart de Bruijn
    Abstract: In the study of international mobility, refugees make up a very specific population. In contrast to most migrants, forcibly displaced persons have little opportunity for expanding livelihoods, and are usually faced with realities that deny them a dignified life and fulfilment of their capabilities. In many situations, people who left their homes to escape from persecution, armed conflict or violence face restrictive policies of the countries in which they found refuge and become critically dependent on humanitarian assistance. This paper describes living conditions and wellbeing of refugees – and more particularly camp-based refugees – in six countries with protracted refugee conditions: Tanzania, Uganda and Kenya in Africa, and Nepal, Bangladesh and Thailand in Asia. It primarily draws on UNHCR’s ‘Standards and Indicators’ data. Thematic areas covered in the paper include legal protection, gender-related issues, food security and nutritional status, health, education, and refugee livelihoods and coping strategies. The assessment of refugees’ living conditions proceeds along two different perspectives. The first is a gap analysis based on UNHCR standards, which are largely in line with SPHERE standards. The second is a comparison of refugees’ living conditions with those of host populations in the country of asylum and with those of populations on the country of origin. The available data lead to the conclusion that the living conditions of refugees vary across thematic areas and are strongly contextualised, depending on a complex of social, economic, political and attitudinal factors. There is also evidence that despite often grim conditions, at times the targeted efforts of humanitarian assistance and own coping strategies produce situations for refugees that are relatively better than that of the local hosting communities or the population in the region of origin.
    Keywords: human development, human mobility, migration, poverty
    JEL: O1 I3 O15 F22
    Date: 2009–07
  15. By: Leo F. Goodstadt (Hong Kong Institute for Monetary Research, Trinity College, University of Dublin, The University of Hong Kong)
    Abstract: This paper uses four case studies to review the performance of the Anglo-American regulatory ¡¥culture¡¦. In the decade before the global financial crisis, American and British officials were almost identical in their analysis of and non-interventionist responses to identified threats from changing financial conditions in Asia; dependence of new financial products on the insurance industry; shortcomings of the rating agencies; and excesses in their property markets. They now acknowledge these past policy errors but continue to resist consumer protection and other reform initiatives.
    Keywords: Asia, China, Derivatives, Insurance, Credit Ratings, Property, Consumer Protection
    Date: 2009–11
  16. By: Michi Nishihara (Graduate School of Economics, Osaka University)
    Abstract: We develop a model for determining whether a firm should exercise two real options individually or simultaneously. The simultaneous exercise of both options has positive synergy, such as economies of scale, scope, and networks, while separate exercise of each option benefits from project flexibility. This tradeoff determines the optimal exercise policy. We investigate the static and dynamic management of multiple real options. A firm under static management determines the type of exercise of real options ex ante; on the other hand, a firm under dynamic management makes the decision at the time of exercise. The analysis reveals the gap between the two styles of managing. Most importantly, we highlight the advantage of dynamic management over static management, particularly for weakly correlated markets. We also explain empirical implications regarding a firmfs entry into several countries and regions in Asia.
    Keywords: multiple real options, optimal stopping, exercise region, entry into Asia
    JEL: C61 G13 G31
    Date: 2010–04
  17. By: Juan Antonio Montecino; Jose Antonio Cordero
    Abstract: This paper looks at both the theoretical and empirical literature on capital controls and finds that capital controls can play an important role in developing countries by helping to insulate them from some of the harmful effects of volatile and short-term capital flows. The authors look at controls on capital inflows in Malaysia (1989-1995); Colombia (1993-1998); Chile (1989-1998); and Brazil (1992-1998), and also consider the case of Malaysia’s controls on outflows in 1998-2001. They conclude that there is sufficient backing in both economic theory and empirical evidence to consider more widespread adoption of capital controls in order to address some of the macroeconomic problems associated with short-term capital flows, to enable certain development strategies, and to allow policy makers more flexibility with regard to crucial monetary and exchange rate policies.
    Keywords: capital controls, capital flows
    JEL: O O1 O16 O2 O23 O24 O5 O55 F F2 F20 F21 F3 F32
    Date: 2010–04
  18. By: Md. Tariqur Rahman; Muhammad Al Amin (Centre for Policy Dialogue, Dhaka, Bangladesh)
    Abstract: This paper quantifies the economic impact of Bangladesh, China, India and Myanmar (BCIM) economic cooperation and compares it with the alternative option of expanding South Asian Free Trade Area (SAFTA) with China and Myanmar. The paper examines the macro-economic performance of the individual countries and the current level of trade among the BCIM member countries at the regional level.
    Keywords: BCIM, SAFTA, Economic Impact
    JEL: F1
    Date: 2009–07
  19. By: Qu Feng (Division of Economics, School of Humanities and Social Sciences, HSS-04-48, 14 Nanyang Drive, Singapore 637332); William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020)
    Abstract: In the fixed-effects stochastic frontier model an efficiency measure relative to the best firm in the sample is universally employed. This paper considers a new measure relative to the worst firm in the sample. We find that estimates of this measure have smaller bias than those of the traditional measure when the sample consists of many firms near the efficient frontier. Moreover, a two-sided measure relative to both the best and the worst firms is proposed. Simulations suggest that the new measures may be preferred depending on the skewness of the inefficiency distribution and the scale of efficiency differences.
    Keywords: stochastic frontier model, relative efficiency measure, two-sided measure, bias, bootstrap confidence intervals
    JEL: C15 C23 D24
    Date: 2010–03

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