nep-sea New Economics Papers
on South East Asia
Issue of 2010‒05‒08
three papers chosen by
Kavita Iyengar
Asian Development Bank

  1. China’s Growing Influence in Southeast Asia - Monetary Policy and Equity Markets By Johansson, Anders C.
  2. Labor Market and Globalization: A Comparison of the Latin American and the East Asian Experiences in the 1980s and 1990s By Bruno, Randolph Luca
  3. Fundamentals and Exchange Rates: Evidence from ASEAN-5 By Rashid, Abdul; Ling, Jeffrey

  1. By: Johansson, Anders C. (China Economic Research Center)
    Abstract: We use structural VAR models with short-run restrictions to analyze the potential transmission of China’s monetary policy shocks to equity markets in Southeast Asia. Our results show that several of the markets in the region are influenced by China’s monetary policy, even though the effect is modest. The impact of a monetary expansion in China is significant and positive for four of the five Southeast Asian equity markets, indicating an increase in demand for goods and services in both China and abroad, which in turn shows up in the foreign equity market. The results provide evidence of China’s growing influence in Southeast Asia and its financial markets. The transmission effect is still quite small, but can be expected to increase if the current trends of deepening economic integration between China and Southeast Asia and a maturing Chinese central bank continue.
    Keywords: Monetary policy; stock market; structural vector autoregressive model; monetary transmission; China; Southeast Asia
    JEL: C32 E44 E52 F42 G10
    Date: 2010–05–01
  2. By: Bruno, Randolph Luca (University College London)
    Abstract: In this paper we analyse the labor market and its relationship with globalization in two groups of countries similar in their GDP per capita levels at the beginning of the 1980s but otherwise significantly different in their economic and social structures. On the one hand we look at Argentina, Brazil and Chile, on the other hand we analyse South Korea, Taiwan and Thailand. It is argued that the Latin American group adopted pro-globalization policies too quickly and without an adequate social safety net, and that the East Asian group was particularly vulnerable to the 1997 crisis in connection with an ill-designed financial markets liberalisation and poor labor market policies. We suggest that the high social costs of labor market imbalances generated throughout the 1980s and 1990s in these two groups of countries should have been tackled within an encompassing development strategy, with an eye at social safety nets and labor supply policies – such as active and passive labor market institutions – designed for each country specifically.
    Keywords: globalization, labor market, Latin America, East Asia
    JEL: F16 J21 O15
    Date: 2010–04
  3. By: Rashid, Abdul; Ling, Jeffrey
    Abstract: Utilizing the combined-form of PPP and UIP we estimate the cointegrating relations for ASEAN-5 economies. The study uses quarterly data over the period from 1980 to 2008. The findings reveal that exchange rate, interest rates and prices are cointegrated, implying that there is co-movement among them in the long run. We also find that the hypothesis – PPP augmented by interest rates forms a cointegrating vector – cannot be rejected. This piece of evidence is consistent with the capital enhanced equilibrium exchange rates (CHEERs) approach, which states that the deviations from PPP can be explained by the interest rates differentials. These evidences defiantly would provide the help in formulating exchange rate policies in ASEAN-5 countries.
    Keywords: Exchange rate; PPP; UIP; ASEAN-5; Cointegration Analysis
    JEL: C32 F3 F31
    Date: 2009–11–25

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