nep-sea New Economics Papers
on South East Asia
Issue of 2010‒08‒28
seven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Production Networks and Trade Patterns in East Asia: Regionalization or Globalization? By Athukorala, Prema-chandra
  2. Exchange Rate Misalignments and World Imbalances: A Fundamental Equilibrium Exchange Rate Approach for Emerging Countries By Nabil Aflouk; Se-Eun Jeong; Jacques Mazier; Jamel Saadaoui
  3. Industrial Upgrading and Export Diversification: A Comparative Analysis of Economic Policies in Turkey and Malaysia By Bilge Erten
  4. Islamic Finance and the Theory of Capital Structure By Nagano, Mamoru
  5. The Common Component in the Forward Premium: Evidence from the Asia-Pacific Region By Nagayasu, Jun
  6. Determinants of Employment in India's National Rural Employment Guarantee Scheme By Raghbendra Jha; Raghav Gaiha; Manoj K. Pandey
  7. The Role of the State in Managing and Forestalling Systemic Financial Crises: Some Issues and Perspectives By Adams, Charles

  1. By: Athukorala, Prema-chandra (Australian National University)
    Abstract: This paper examines the implications of global production sharing for economic integration in East Asia, with emphasis on the behavior of trade flows in the wake of the 2008 global economic crisis. While trade in parts and components and final assembly within production networks (“network trade”) has generally grown faster than total world trade in manufacturing, the degree of dependence of East Asia on this new form of international specialization is proportionately larger than elsewhere in the world. Network trade has certainly strengthened economic interdependence among countries in the region, with the People’s Republic of China (PRC) playing a pivotal role as the premier center of final assembly. However, contrary to the popular belief, this has not lessened the dependence of the export dynamism of these countries on the global economy. The rise of global production sharing has strengthened the case for a global, rather than regional, approach to trade and investment policymaking.
    Keywords: production sharing; trade patterns; East Asia; PRC
    JEL: F10 F14 O53
    Date: 2010–08–01
  2. By: Nabil Aflouk (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Se-Eun Jeong (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Jacques Mazier (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Jamel Saadaoui (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII)
    Abstract: Since the mid-1990s, the world imbalances have increased significantly with a large US current deficit facing Asian surpluses, mainly Chinese. Since 2007, a partial reduction of these imbalances has been obtained, largely thanks to production's decreases, without large exchange rate adjustments. The Asian surpluses have remained important. The objective of this paper is to examine the exchange rate misalignments (ERM) of the main emerging countries in Asia and Latin America since the 1980s, so as to shed light on the 2000s by a long term analysis and compare with the industrialized countries' case. Our results confirm that ERM have been reduced since the mid-2000s at the world level, but the dollar remained overvalued against the East Asian countries, except the yen. Chinese, Indian and Brazilian exchange rate policies have been much contrasted since the 1980s. The Indian rupee has been more often overvalued while a more balance situation prevailed in Brazil only since the 2000s. The Latin American countries have faced wider and more dispersed ERM and current imbalances than East Asian countries. But Argentina, Chile and Uruguay benefits now of undervalued currencies while Mexico is closer to equilibrium.
    Keywords: Equilibrium Exchange Rate, Current Account Balance, Macroeconomic Balance, Emerging Countries
    Date: 2010–05–27
  3. By: Bilge Erten
    Abstract: This paper considers the prospects of manufactured exports of Turkey and Malaysia given the rising standards of global competition. While Malaysia has the advantage of having an export-oriented MNC-led industry in high-technology manufactures, Turkey has a weaker, stagnant export structure when it comes to increasing its technology content. Its low-technology textile and food manufacturing industries face difficulties in competing against Asian producers which have access to much lower real wage levels. In more sophisticated parts of manufacturing, Turkish firms find it difficult to compete against high-technology European firms. The divergent trends in net barter and income terms of trade is a reflection of these structural differences. A periodical comparison of actual economic policies’ impact on industrial and trade outcomes is followed by an econometric analysis of trade liberalization on trade performance and balance of payments. Conclusions are drawn from the implications of these qualitative and quantitative assessments. [Working Paper No. 266]
    Keywords: Industrial Upgrading, Export Diversification, Turkey, Malasia
    Date: 2010
  4. By: Nagano, Mamoru
    Abstract: This paper empirically investigates firms using Islamic finance in Malaysia and Middle East countries. The comparative analysis of Islamic finance and non-Islamic finance users resulted in three major implications. First, Islamic bond issuers preferentially choose the Islamic bond issuance prior to bank borrowing and other external financing tools. Second, Islamic bond issuance is not related to the issuer’s internal funds, while Islamic bank borrowing is significantly influenced by the magnitude of a firm’s internal funds. These results suggest that Islamic bond issuers do not always choose to issue bonds based on information cost, but Islamic bank borrowers always do. Third, the Islamic bond issuance contributes to an increase in the issuer’s stock returns and total factor productivity. This empirical result suggests that Islamic bond issuance is preferred because of this unique benefit which standard external financing does not have.
    Keywords: Capital Structure; Bond Issuance; Islamic Finance
    JEL: G3
    Date: 2010–01–02
  5. By: Nagayasu, Jun
    Abstract: This paper empirically analyzes the behavior of the forward premium. Unlike previous research, we use data from Asia-Pacific countries and adopt the panel data approach (Bai and Ng 2004) which allows us to decompose the forward premium into common and idiosyncratic (country-specific) components. Our data suggest the presence of one common factor and the stationarity of both common and idiosyncratic factors for short maturities, leading to the conclusion of a stationary forward premium. In contrast, the stationarity of the premium is less supported by the longer maturity data. Furthermore, a large portion of the premium fluctuation is shown to be due to a common factor, particularly over the short time horizon, which in turn can be explained by economic and financial developments in the US. In particular, when the US interest rate increases and the economy declines, the common factor tends to fall.
    Keywords: Forward premium; common factor; panel unit root test
    JEL: F41
    Date: 2010–08–21
  6. By: Raghbendra Jha; Raghav Gaiha; Manoj K. Pandey
    Abstract: Using household level data this paper provides systematic evidence on the employment impact of the National Rural Employment Guarantee Scheme in three Indian states: Rajasthan, Andhra Pradesh and Maharashtra. We model this as a two stage Heckman procedure where we model selection for NREGS in the first phase and the determinants of hours worked in the second. A number of significant insights into the employment impact of the National Rural Employment Guarantee Scheme are obtained.
    Keywords: National Rural Employment Guarantee Scheme, Heckman Models, Asia: India
    Date: 2010
  7. By: Adams, Charles (Asian Development Bank Institute)
    Abstract: This paper reviews recent state interventions in financial crises and draws lessons for crisis management. A number of areas are identified where crisis management could be strengthened, including with regard to the tools and instruments used to involve the private sector in crisis resolution (with a view to reducing the recent enhanced role of official bailouts and the associated moral hazard), to allow for the orderly resolution of systemically important financial firms (to make these firms "safe to fail"), and with regard to achieving better integration with ex ante macroprudential surveillance. The paper proposes the establishment of high level systemic risk councils (SRCs) in each country with responsibility for overseeing systemic risk in both tranquil times and crisis periods and coordinating the activities of key government ministries, agencies, and the central bank.
    Keywords: global financial crisis; state intervention; macroprudential surveiilance; crisis resolution; prevention
    JEL: E01 E58
    Date: 2010–08–16

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