nep-sea New Economics Papers
on South East Asia
Issue of 2010‒07‒24
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Financing Asia’s Infrastructure: Modes of Development and Integration of Asian Financial Markets By Bhattacharyay, Biswa
  2. Institutions for Asian Connectivity By Biswa N Bhattacharyay
  3. A Nonlinear New Approach to Investigating Crisis: A Case from Malaysia By Omay, Tolga
  4. The Chiang Mai Initiative Multilateralization: Origin, Development and Outlook By Sussangkarn, Chalongphob
  5. Growth accounting with misallocation: Or, doing less with more in Singapore By John Fernald; Brent Neiman
  6. International Donors and the Reform of Indonesian ational Police By Yoko Iwama
  7. Investigating the Relationship between Health and Economic Growth: Empirical Evidence from a Panel of 5 Asian Countries By Seema Narayan; Paresh Kumar Narayan; Sagarika Mishra
  8. Cutting the costs of attrition: Results from the Indonesia Family Life Survey By Duncan Thomas; Bondan Sikoki; Cecep Sumantri; Elizabeth Frankenberg; Firman Witoelar; John Strauss; Wayan Suriastini
  9. Police Building in Timor-Leste – Mission Impossible? By Jim Della-Giacoma
  10. Aid, social capital and village public goods: after the tsunami. By Freire, Tiago; Henderson, J. Vernon; Kuncoro, Ari
  11. Monetary policy and firms’ investment: Dynamic panel data evidence from Malaysia By Abdul Karim, Zulkefly
  12. Monetary policy and firm-level stock returns in an emerging market: Dynamic panel evidence from Malaysia By Abdul Karim, Zulkefly

  1. By: Bhattacharyay, Biswa (Asian Development Bank Institute)
    Abstract: Asia faces very large infrastructure funding demands, estimated at around US$750 billion per year for energy, transport, telecommunications, water, and sanitation during 2010-2020 (ADB/ADBI 2009). Asia has large savings, significant international reserves, and rapid accumulations of funds that could be utilized for meeting these infrastructure investment needs, but Asian markets have failed to use available resources to channel funding into highly needed infrastructure projects. This paper explores issues and challenges in financing infrastructure for seamless Asian infrastructure connectivity and for other high priority development financing needs, and seeks methods and instruments to help direct Asian and international resources to cost-effectively and efficiently support infrastructure and other development needs. The paper discusses three important topics: First, what are the lessons for Asia from the European Union's experience of developing and integrating financial markets and using development banking institutions to support infrastructure investment? Second, how can Asian public and private resources, such as pension funds, social security funds, sovereign wealth funds, and private portfolio funds contribute to infrastructure development across Asia? Third, can Islamic financial markets provide funds for Asian infrastructure development? Finally, the paper makes recommendations regarding financing options and how Asian financial markets and infrastructure companies could be further developed and integrated to mobilize Asian and other regions' savings for financing priority infrastructure projects in the region.
    Keywords: asian financial markets; asian infrastructure; asian infrastructure financing
    JEL: G10 G20
    Date: 2010–07–12
  2. By: Biswa N Bhattacharyay
    Abstract: To make Asia more economically sustainable and resilient against external shocks, regional economies need to be rebalanced toward regional demand- and trade-driven growth through increased regional connectivity. The effectiveness of connectivity depends on the quality of hard and soft infrastructure. Of particular importance in terms of soft infrastructure which makes hard infrastructure work are the facilitating institutions that support connectivity through appropriate policies, reforms, systems, and procedures and through promoting effective coordination and cooperation. Asia has many overlapping subregional institutions involved in national and regional energy, transport, and telecommunications infrastructure connectivity. However, these institutions are characterized as being less effective, informal, and lacking a clear and binding system of rules and policies. This paper draws linkages between connectivity, growth and development, governance, and institutions. It details the benefits the region could achieve by addressing needed connectivity enhancements and the connectivity and financing challenges it faces. In addition, it presents various institutional options for regional infrastructure financing. To build seamless Asian connectivity, Asia needs an effective, formal, and rules-based institutional framework. The paper presents a new institutional framework together with the organizational structures of two new regional institutional mechanisms, namely the Pan-Asian Infrastructure Forum and the Asian Infrastructure Fund. [ADBI WP 220]
    Keywords: connectivity, Asia, telecommunications infrastructure, institutional mechanisms, Pan-Asian Infrastructure Forum, Asian Infrastructure Fund, trade-driven growth, Asia
    Date: 2010
  3. By: Omay, Tolga
    Abstract: In this paper, we have investigated the effects of Asia 97 crisis on Malaysian stock exchange market by using a nonlinear approach which gives a detailed analysis with respect to linear counterparts. Specifically, we are using generalized impulse response function (GIRF) in order to see the effects of crisis on stock indices. In order to employ GIRF analysis, we need further investigation on potential nonlinearities in conditional mean and variance equation for Malaysia stock market. Specifically, we use STAR-STGARCH family models for modeling daily returns of the Investable and Non-Investable Malaysia stock indices, covering the period 1995.06.30-2003.09.05. The analysis of this paper shows that individual markets of Malaysia have strongly been affected from the Asia 97 crisis. In addition, the Asia 97 crisis has increased the variability of the Malaysia stock market and affected foreign investors more than the domestic investors.
    Keywords: STAR-STGARCH; Generalized Impulse Response Function. 1997 Asia Crisis; stock markets
    JEL: G1 C22
    Date: 2010–06–09
  4. By: Sussangkarn, Chalongphob (Asian Development Bank Institute)
    Abstract: This paper discusses the Chiang Mai Initiative Multilateralization (CMIM); its origin, development and future outlook. It puts forward a number of proposals to make the liquidity support role of the CMIM more effective. It is further argued that the CMIM can bring about major changes to the policy institutional infrastructure of East Asia, particularly through the establishment of an Independent Surveillance Unit (ISU). The ISU can provide technical and secretariat support to financial cooperation processes in the region, which have thus far been driven by officials on a part-time basis. Consolidation of the main financial forums in the region is also proposed, specifically the Finance Minister Process and the Central Bank Process. Membership of these two processes should be expanded and unified, with the ISU providing technical and secretariat support. It is argued that regular policy meetings can be institutionalized and that this could enhance the role of East Asia in the global financial arena, whilst facilitating policy cooperation, with important regional and global implications.
    Keywords: asian financial cooperation; asian policy cooperation; asian institutional infrastructure
    JEL: E44 F33 F36 F42 G15
    Date: 2010–07–12
  5. By: John Fernald; Brent Neiman
    Abstract: We derive aggregate growth-accounting implications for a two-sector economy with heterogeneous capital subsidies and monopoly power. In this economy, measures of total factor productivity (TFP) growth in terms of quantities (the primal) and real factor prices (the dual) can diverge from each other as well as from true technology growth. These distortions potentially give rise to dynamic reallocation effects that imply that change in technology needs to be measured from the bottom up rather than the top down. We show an example, for Singapore, of how incomplete data can be used to obtain estimates of aggregate and sectoral technology growth as well as reallocation effects. We also apply our framework to reconcile divergent TFP estimates in Singapore and to resolve other empirical puzzles regarding Asian development.
    Keywords: Industrial productivity ; Productivity ; Technology ; Singapore
    Date: 2010
  6. By: Yoko Iwama (National Graduate Institute for Policy Studies)
    Abstract: Various countries have been involved in the process of the separation of Indonesian National Police (INP) from the military, which started alongside the democratization of the Indonesian state. Although this is not an example of post-conflict peace support operation, it is one of the closest examples where outside intervention seems to have had some impact. This paper examines the efforts by the US, IOM, and Japan each trying to influence the process in its own way, and attempts to draw lessons for post-conflict police building cases. This work was supported in part by Global COE Program "The Transferability of East Asian Development Strategies and State Building", Mext, Japan.
    Date: 2010–07
  7. By: Seema Narayan; Paresh Kumar Narayan; Sagarika Mishra
    Abstract: In this paper, we investigate the relationship between health and economic growth through including investment, exports, imports, and research and development (R&D), for 5 Asian countries using panel unit root, panel cointegration with structural breaks and panel long-run estimator for the period 1974-2007. We model this relationship within the production function framework, and unravel two important results. First, we find that in three variants of the growth model, variables share a long-run relationship; that is, they are cointegrated. Second, we find that in the long-run, while health, investment, exports, and R&D have contributed positively to economic growth, imports have had a statistically significant negative effect while education has had an insignificant effect. We draw important policy implications from these findings.
    Keywords: Health; Economic Growth; Panel Unit Root; Panel Cointegration.
    JEL: C23 C33 I10 I20
    Date: 2010–07–16
  8. By: Duncan Thomas; Bondan Sikoki; Cecep Sumantri; Elizabeth Frankenberg; Firman Witoelar; John Strauss; Wayan Suriastini
    Abstract: Attrition is the Achilles heel of longitudinal surveys. Drawing on our experience in the Indonesia Family Life Survey, we describe survey design and field strategies that contributed to minimizing attrition over four waves of the survey. The data are used to illustrate the selectivity of respondents who attrit from the survey and, also the selectivity of respondents who move from the place they were interviewed at baseline and are subsequently interviewed in a new location. These results provide insights into the nature of selection that will arise in studies that fail to track and interview movers. Attrition, and types of attrition, are related in complex ways to a broad array of characteristics measured at baseline. Our evidence also suggests attrition may be related to characteristics that are not observed in our baseline. We draw on data from a Survey of Surveyors and describe characteristics of both the interviewers and the interview that predict attrition in later waves. These characteristics point to possible strategies that may reduce levels of attrition and may also reduce the impact of attrition on the interpretation of models estimated with longitudinal data. [Working Paper No. 259]
    Keywords: Attrition, longitudinal studies, survey design, Indonesia
    Date: 2010
  9. By: Jim Della-Giacoma (Crisis Group, Jakarta, Indonesia)
    Abstract: In the quest to find a success story of international police building, eyes often turn towards Timor-Leste. What we find there is neither a story of success nor failure for either the Timorese or the UN contingents sent there over the last decade. The tale of police building in Timor-Leste is one of quick fixes, short cuts, and lessons apparently not yet learned leading to modest results. The UN’s initial state building efforts did leave behind a police service, but it was a weak one. This experience shows the limits of the UN as an institution for police development. This work was supported in part by Global COE Program "The Transferability of East Asian Development Strategies and State Building", Mext, Japan.
    Date: 2010–07
  10. By: Freire, Tiago; Henderson, J. Vernon; Kuncoro, Ari
    Abstract: Using survey data on fishermen and fishing villages in Aceh, Indonesia from 2005 and 2007, this paper examines the effect of the December 2004 tsunami and resulting massive aid effort on local public good provision, in particular on public labor inputs, but also public capital choices. Also analyzed are the roles of and changes in local social and political institutions and participation in political and social activities. Such an examination informs not only our understanding of the impacts of aid on villages, but also our understanding of how villages allocate resources to public goods. For public labor inputs, volunteerism is lower in villages with more aid projects, but that is offset if the dominant donor mitigates agency problems by doing its own implementation. Volunteerism is lower in villages with more 'democratic' activity such as elections, although that effect is mitigated in villages with higher levels of social capital pre-tsunami. Evidence suggests volunteerism is lower not because of changes in types of leaders with village elections per se, but rather due to heightened internal divisions associated with elections. Correspondingly for public capital, villages with more democratic activity combined with more aid projects tend to emphasize garnering private aid (e.g., houses) at the expense of public aid (e.g., public buildings).
    Keywords: Aid; Volunteer; Public Goods.
    JEL: H41 O12
    Date: 2010–06–04
  11. By: Abdul Karim, Zulkefly
    Abstract: This study examines the effects of monetary policy on firms’ balance sheet, with a particular focus on the effects upon the firms’ fixed-investment spending. It uses a dynamic panel system GMM estimation proposed by Blundell and Bond (1998). The focal point has given to the two main channels of monetary policy transmission mechanism such as interest rates and broad credit channel in transmitting to firm investment spending. By estimating the firms’ investment model using a dynamic neo-classical framework, the empirical results tend to support the relevance of interest rates and broad credit channel in transmitting to the firm balance sheet condition that is firm’s investment spending. The results also reveal that the effect of monetary policy channels to the firms’ investment are heterogeneous fashioned, which is the small firms who faced financial constraint are responded more due to monetary tightening as compared to the large firm (less constraint firms). Thus, the monetary authority has to concern the microeconomic aspects of the firm in formulation their monetary policy.
    Keywords: Monetary policy; Financial Constraint; Firm Investment; Dynamic Panel Data
    JEL: C23 E52 D92
    Date: 2010–02–10
  12. By: Abdul Karim, Zulkefly
    Abstract: This paper investigates the effect of monetary policy shocks (domestic and international monetary policy) on Malaysian firm-level equity returns in a dynamic panel data framework. After controlling for a variety of other stock return determinants, I find that firm stock returns have responded negatively to monetary policy shocks. Moreover, the effect of domestic monetary policy shocks on stock returns is also heterogeneous fashion, which is small firm equity is significantly affected by monetary policy, whereas large firm equity is not significantly affected. The effect of domestic monetary policy is also heterogeneous by firm’s nature of business, which is only industrial product is significantly affected by monetary policy, whereas others sub-sector economy are not affected. The effect of international monetary policy upon firm-level stock returns is also heterogeneous, which is significantly affected the large firm equity, whereas insignificantly affected the small firm equity. The industrial product and property firm stock returns are also significantly affected by international monetary policy; whereas, others sub-sector are not significantly affected. The equity return of financially constraint firm is also significantly more affected upon domestic monetary policy than less-constraint firm. However, international monetary policy is insignificantly influenced the financially constraints firm; whereas, the stock returns of less-constraint firm is significantly affected. This finding stated that the relevance of international risk factor (in particular international monetary policy) in influencing the firm-level stock returns. Therefore, domestic monetary authority has to consider the development in international monetary policy in formulating their monetary policy. In the meantime, the monetary authority has to observe the development in domestic stock market, which is can be influenced by monetary policy in order to take advantage of the effect of stock market to economy activity.
    Keywords: Monetary policy shocks; firm’s stock return; dynamic panel data; augmented multifactor model
    JEL: G12 C23 E52
    Date: 2009–10–07

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