nep-sea New Economics Papers
on South East Asia
Issue of 2010‒05‒29
seven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Foreign direct investment, exports, and economic growth in selected emerging countries: Multivariate VAR analysis By Kalirajan, Kaliappa; Miankhel, Adil; Thangavelu, Shandre
  2. Identifying Shocks in Regionally Integrated East Asian Economies with Structural VAR and Block Exogeneity By Kiyotaka Sato; Zhaoyong Zhang; Michael McAleer
  3. Interdependence of International Tourism Demand and Volatility in Leading ASEAN Destinations By Chia-Ling Chang; Thanchanok Khamkaew; Michael McAleer; Roengchai Tansuchat
  4. ASEAN: A Chronicle of Shifting Trade Exposure and Regional Integration By Sanjay Kalra
  5. The Structural Relationship between Current and Capital Account Balance in India: A Time Series Analysis By Chakraborty, Debashis; Mukherjee, Jaydeep; Sinha, Tanaya
  6. Food Security, Gender and Occupational Choice among Urban Low-Income Households By Maria Floro; Ranjula Bali Swain
  7. Pursuing the Wrong Options? Adjustment Costs and the Relationship between Uncertainty and Capital Accumulation By Bond, Stephen R.; Söderbom, Måns; Wu, Guiying

  1. By: Kalirajan, Kaliappa; Miankhel, Adil; Thangavelu, Shandre
    Abstract: The paper adopts a time series framework of the Vector Error Correction Models (VECM) to study the dynamic relationship between export, FDI and GDP for six emerging countries of Chile, India, Mexico, Malaysia, Pakistan and Thailand. Stationarity of the series with structural breaks is also examined in the model. Given that these countries are at different stages of growth, we will be able to identify the impact of FDI and export on economic growth at different stages of growth. The results suggest that in South Asia, there is evidence of an export led growth hypothesis. However, in the long run, we identify GDP growth as the common factor that drives growth in other variables such as exports in the case of Pakistan and FDI in the case of India. The Latin American countries of Mexico and Chile show a different relationship in the short run but in the long run, exports affect the growth of FDI and output. In the case of East Asian countries, we find bi-directional long run relationship among exports, FDI and GDP in Malaysia, while we find a long run uni-directional relationship from GDP to export in case of Thailand.
    Keywords: FDI; Exports; Multivariate VAR; Pakistan; India; Malaysia; Thailand; Chile; Mexico.
    JEL: C22 F43 B41
    Date: 2009–05–28
  2. By: Kiyotaka Sato; Zhaoyong Zhang; Michael McAleer (University of Canterbury)
    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
    JEL: F33 F36 F41
    Date: 2010–05–01
  3. By: Chia-Ling Chang; Thanchanok Khamkaew; Michael McAleer (University of Canterbury); Roengchai Tansuchat
    Abstract: International and domestic tourism are leading economic activities in the world today. Tourism has been known to generate goods and services directly and indirectly, attract foreign currency, stimulate employment, and provide opportunities for investment. It has also been recognized as an important means for achieving economic development. Substantial research has been conducted to evaluate the role of international tourism, and its associated volatility, within and across various economies. This paper applies several recently developed models of multivariate conditional volatility to investigate the interdependence of international tourism demand, as measured by international tourist arrivals, and its associated volatility in the four leading destinations in ASEAN, namely Indonesia, Malaysia, Singapore and Thailand. Each of these countries has attractive tourism characteristics, such as significant cultural and natural resources. Shocks to international tourism demand volatility could affect, positively or negatively, the volatility in tourism demand of neighbouring countries. The empirical results should encourage regional co-operation in tourism development among ASEAN member countries, and also mobilize international and regional organizations to provide appropriate policy actions.
    Keywords: Tourism demand; ASEAN; multivariate GARCH; volatility spillovers; interdependence; economic development; seasonality
    JEL: C22 C32 F50 O53
    Date: 2010–05–01
  4. By: Sanjay Kalra
    Abstract: The paper characterizes trade exposure and regional integration in six ASEAN economies during 1997-2008. For this, the paper uses the 2000 Asian Input Output Tables which are extrapolated using National Income Accounts and COMTRADE data. On the demand side, the paper shows that the level and geographical nature of external exposure varies across the ASEANs, and has changed over time. In particular, there was a shift in the external demand exposure of ASEANs from mature markets, including the United States, to China and ROW. In addition, the share of China in East Asia’s final demand, especially investment, rose sharply while that of Japan fell. On the supply side, the paper documents the rise of China into a “global factory†and the steady shift in regional production and integration from Japan and the United States to China.
    Keywords: Asia , Association of Southeast Asian Nations , Consumption , Cross country analysis , Demand , Economic integration , Economic models , Investment , Production , Trade integration ,
    Date: 2010–05–10
  5. By: Chakraborty, Debashis; Mukherjee, Jaydeep; Sinha, Tanaya
    Abstract: The long run relationship between current account balance (CAB) and capital account balance (KAB) and the repercussions of capital account convertibility (KAC) on growth process of a country is a much debated issue. In particular, in the aftermath of the Southeast Asian crisis, the limitation of the liberal capital regime for a developing country like India is often highlighted in the literature. However, the probable impact of introducing KAC on CAB in India generally is discussed theoretically. Though some of the existing studies in India have earlier focused on this research question, they have done so by exogenously assuming the existence of a single structural break in the interrelationship between CAB and KAB. The present study intends to bridge the gap in the literature by raising two empirical questions: first, how far KAC is likely to destabilize the CAB and second, measuring the strength of the interrelationship between CAB and KAB. The current paper also contributes to the literature by incorporating multiple endogenous structural breaks in the empirical analysis. The empirical findings do not support any long term relationship between capital and current account balance and reveals that two significant structural breaks are observed in 1993-94 and 2003-04.
    Keywords: International Capital Movements; Foreign Exchange; Current Account Adjustment
    JEL: F32 F21 F31
    Date: 2010–05–20
  6. By: Maria Floro; Ranjula Bali Swain
    Abstract: Rising urban poverty and food insecurity are serious concerns in developing countries today. Urban livelihoods and coping strategies remain poorly understood however. This paper examines the response of female and male household members in marginalized urban (predominantly squatter) areas to the risk of food shortage in terms of occupational choice. More specifically, we use probit analyses to investigate whether household vulnerability or the need to provide self-insurance for food security, alongside gender roles, influence a worker’s choice of enterprise activity. We focus our investigation on self-employed women and men using a data set drawn from the 1496 individual sample in 14 urban squatter communities in Bolivia, Ecuador, Philippines and Thailand. Our findings show that selfemployed women in households facing higher risk of food insecurity are likely to engage in food-related enterprise activities and this is especially true in Philippines and Thailand. This suggests the role of occupational choice in in helping urban squatter households in mitigating the risk of food shortage through the selection of an income-generating activity that allows the direct use of unsold inventories for food consumption.
    Keywords: food security, self-employment, occupational choice, urban informal sector
    Date: 2010–05
  7. By: Bond, Stephen R. (Nuffield College, Department of Economics and Centre for Business Taxation, University of Oxford, UK and Institute for Fiscal Studies); Söderbom, Måns (Department of Economics, School of Business, Economics and Law, Göteborg University); Wu, Guiying (Nanyang Technological University, Singapore)
    Abstract: bel and Eberly (1999) show that the effect of uncertainty on long run capital accumulation is ambiguous in a real options model with irreversible investment. We show that a higher level of uncertainty tends to reduce expected capital stock levels in a model with strictly convex adjustment costs. Simulations suggest that this negative impact of uncertainty on capital accumulation may be substantial. We also provide some intuition for this result.
    Keywords: Uncertainty; real options; adjustment costs; capital accumulation.
    JEL: C15 D92 E22
    Date: 2010–05–17

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