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on South East Asia |
| By: | Matthew S. Yiu (Research Department, Hong Kong Monetary Authority); Wai-Yip Alex Ho (Research Department, Hong Kong Monetary Authority); Lu Jin (Research Department, Hong Kong Monetary Authority) |
| Abstract: | This paper investigates the spillover of financial crises by studying the dynamics of correlation between eleven Asian and six Latin American stock markets vis-¨¤-vis the US stock market. A regional factor that drives common movements of stock markets in each region is identified for the period from 1993 to early 2009. We then estimate the time-varying volatility correlation between the regional factor and the US stock market by an asymmetric dynamic conditional correlation model. We find that there is a significant rise in the estimated time-varying correlation in the period from August 2007 to March 2009, suggesting evidence of contagion from the US stock market to markets in the two regions during the global financial turmoil. The magnitude of the contagion effect to both regions in the global financial crisis is very similar, albeit their different economic, political and institutional characteristics. On the other hand, we find no evidence of having contagion from the US to the Asian region during the Asian financial crisis in 1997 and 1998 as expected, since the crisis was originated locally. |
| Keywords: | Principal Component, Financial Contagion, Financial Crisis, Dynamic Conditional Correlation, Asia Pacific Economies, Latin American Economies |
| JEL: | F30 G15 G12 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:hkg:wpaper:1001&r=sea |
| By: | Luiz de Mello (OECD Economics Department) |
| Abstract: | This paper tests the hypothesis that, by giving people more voice in the government decision-making process, fiscal decentralisation fosters social capital, measured in terms of interpersonal trust. Empirical evidence based on World Values Survey data and seemingly unrelated probit estimations for a cross-section of countries suggests that people living in federal/decentralised countries find it more important than their counterparts living in unitary/centralised countries to have voice in government decisions, which, in turn, is associated with greater social capital. The cross-country estimations are complemented by country-specific regressions for Brazil and Indonesia on account of these countries’ experiences with fiscal decentralisation. The results show that the cohorts of individuals that have been exposed to decentralisation are in general more pro-voice (and trustful of strangers in the case of Brazil) than their counterparts that have not been exposed to decentralisation. These findings are not driven by the effects of political liberalisation on people’s attitudes towards the importance of having voice in government decisions and interpersonal trust. |
| Keywords: | Federalism, decentralisation, social capital, Brazil, Indonesia |
| Date: | 2010–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1007&r=sea |
| By: | Kim, Sung Teak (Asian Development Bank Institute) |
| Abstract: | This paper analyzes the impacts of the 1998 and 2008 financial crises on the Korean labor market. We study the historical background of the Korean Employment Insurance System and the change of labor policies from the 1998 Asian financial crisis to the current 2008 global financial crisis. While it is arguable to say that the expansion of the social welfare system in the Republic of Korea is main source of difference between the two crises, it is certain that the social welfare system is one of the influential factors that helped overcome the problems of the global financial crisis. From an analysis of the Korean experience on the two financial crises, we can deduce the following. First, financial stability at the national level is important to stabilize employment. Second, countries need to develop a social welfare system ahead of any economic crisis. Third, layoffs should be the last resort to lowering labor costs, even at a time of recession. Finally, cooperation and coordination among government departments are crucial to overcome the crisis in labor market. |
| Keywords: | korean labor market; financial crises |
| JEL: | I30 I38 J65 J68 |
| Date: | 2010–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0214&r=sea |
| By: | Wei Liao (Hong Kong Institute for Monetary Research); Kang Shi (The Chinese University of Hong Kong and Hong Kong Institute for Monetary Research); Zhiwei Zhang (China International Capital Corporation) |
| Abstract: | This paper examines how China's exports are affected by exchange rate shocks from countries who supply intermediate inputs to China. We build a simple small open economy model with intermediate goods trade to show that due to the intraregional trade in intermediate goods, a devaluation of other Asian currencies does not necessarily damage China's exports, as imported intermediate goods could become cheaper. This channel through the cost of intermediate goods depends critically on the share of intermediate goods used in China's export goods production and the degree of exchange rate pass-through in imported intermediate goods prices. If prices for intermediate goods are not very sticky, the effect through this channel could be large and China's exports could even benefit. We find the above findings do not depend on China's choice of currency invoicing between RMB and the US dollar or the choice between fixed and flexible exchange rate regimes. |
| Keywords: | Vertical Trade, Exchange Rates, Export Dynamics, Currency Invoicing |
| JEL: | F3 F4 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:102010&r=sea |
| By: | Sayeeda Bano (University of Waikato) |
| Abstract: | This paper explores trade development by the Association of South East Asian Nations (ASEAN) with a particular reference to New Zealand and in the context of free trade agreements and partnerships. It describes the history of ASEAN, its trade composition, diversity and intensity. The paper includes an analysis of Kojima indices of trade intensities, the trade potential index and a gravity trade model using panel data and multivariate analysis. Hypotheses derived from trade theories are then tested to identify the key determinants of trade and the implications for policy. Overall, the study shows that economic integration has had a positive impact on ASEAN nations and with New Zealand and with ongoing potential. |
| Keywords: | international trade; regional economic integration; trade potential; ASEAN-New Zealand trade; FTA; CEP |
| JEL: | F10 F02 F13 F14 F15 |
| Date: | 2010–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:10/01&r=sea |
| By: | Harry P. Bowen (Queens University of Charlotte); Haris Munandar (Bank Indonesia); Jean-Marie Viaene (Erasmus University Rotterdam, and CESifo) |
| Abstract: | European economic integration is commonly believed to be incomplete, and that further reforms are needed. In this context, the union of U.S. states is considered the benchmark of complete economic integration and is often the basis for comparison regarding the extent of E.U economic integration. Yet, with low trade barriers and with productive factors at least notionally mobile across E.U. countries, is the belief that U.S. states are more integrated than E.U. member states correct? To address this question, this paper first develops three theoretical predictions about the distribution of output and factors that would arise among members of a fully integrated economic area in which goods, capital and labor are freely mobile and policies are harmonized. These theoretical predictions are then empirically tested using data on the output and factor stocks of 14 E.U. member states and the 51 U.S. states (includes District of Columbia) for the period 1965 to 2000. The empirical results convincingly support each theoretical prediction. Hence, contrary to popular belief, the extent of E.U. economic integration is not statistically different from that among U.S. states. |
| Keywords: | Economic integration; capital mobility; factor price equalization; Brownian motion; Zipf’s law |
| JEL: | E13 F15 F21 F22 F4 O57 |
| Date: | 2010–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20100009&r=sea |