nep-sea New Economics Papers
on South East Asia
Issue of 2010‒10‒02
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The 2008 Financial Crisis and Potential Output in Asia: Impact and Policy Implications By Park, Cyn-Young; Yap, Josef T.; Majuca, Ruperto P.
  2. Exchange Rate Asymmetry and Flexible Exchange Rates under Inflation Targeting Regimes: Evidence from Four East and Southeast Asian Countries By Pontines, Victor; Siregar, Reza Y.
  3. Fear of Appreciation in East and Southeast Asia: The Role of the Chinese Renminbi By Pontines, Victor; Siregar, Reza Y.
  4. Modelling Conditional Correlations in the Volatility of Asian Rubber Spot and Futures Returns By Chia-Lin Chang; Thanchanok Khamkaew; Michael McAleer; Roengchai Tansuchat
  5. Prospects for Regional Cooperation between Latin America and the Caribbean Region and the Asia and Pacific Region: Perspective from East Asia By Medalla, Erlinda M.; Balboa, Jenny D.
  6. Sudden Stops, Output Drops, and Credit Collapses By Jihad Dagher
  7. Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia By Chia-Lin Chang; Thanchanok Khamkaew; Michael McAleer
  8. The G-20 and International Financial Institution Governance By Edwin M. Truman
  9. "Asia and the Global Crisis: Recovery Prospects and the Future" By Jesus Felipe
  10. Past Experience and Future Success: New Evidence on Owner Characteristics and Firm Performance By Ron Jarmin; C.J. Krizan
  11. The Determinants and Stability of Real Money Demand in Vietnam, 1999-2009 By NGUYEN Huyen Diu; Wade D. Pfau
  12. Education and Freedom of Choice: Evidence from Arranged Marriages in Vietnam By Stephen C. Smith; M. Shahe Emran; Fenohasina Maret
  13. A qui se fier quand les aliments font peur ? Labels, points de vente et décontamination symbolique au Vietnam By Figuié, M.; Mayer, J.

  1. By: Park, Cyn-Young; Yap, Josef T.; Majuca, Ruperto P.
    Abstract: Monitoring the behavior of potential output helps policymakers implement appropriate policies in response to an economic crisis. In the short-run, estimates of the output gap will guide the timing of implementation and withdrawal of stimulus measures. In the medium- to long-term, these estimates will also provide the basis for gauging productive potential and hence guide policies to support the sustainable noninflationary output growth. In this paper, the authors investigate the postcrisis behavior of potential output in emerging East Asian economies by employing the Markov-switching model to account for structural breaks. Results show that after the 1997/98 Asian financial crisis, potential output in Hong Kong, China; Korea; Singapore; and Malaysia reverts to the level consistent with the trend prior to the crisis. While there is a permanent drop in potential output in Thailand and Indonesia, growth rates returned to the precrisis trend. PRC, Taipei,China, and the Philippines are special cases. Econometric estimates of a simple growth model show that the difference among economies can be attributed to the investment-GDP ratio, macroeconomic policies, exchange rate behavior, and productivity which is proxied by the level of technological activity. These results can guide policy after the 2008 crisis.
    Keywords: Philippines, East Asia, potential output, Markov-switching model, structural break, global crisis
    Date: 2010
  2. By: Pontines, Victor; Siregar, Reza Y.
    Abstract: We demonstrate that the economies of Indonesia, Korea, Philippines and Thailand, which are among the first group of emerging markets to embrace the inflation targeting framework of monetary policy, tend to adopt a form of an asymmetrical exchange rate behaviour wherein appreciation pressures are restrained more substantially than depreciation pressures. In short, these four Asian economies exemplify aversion to appreciations such that greater flexibility is allowed only one side of the market. Formal econometric tests using the smooth transition autoregressive and the Markov regime switching models confirm this hypothesis of aversion to appreciation and show that the central banks of these four economies tend to tolerate more of depreciations than of appreciations of their local currencies against the US dollar.
    Keywords: Exchange Rate Asymmetry Inflation Targeting; Fear of Floating; Fear of Appreciation; Regime Switching Models.
    JEL: E58 F41 F31
    Date: 2010–08–28
  3. By: Pontines, Victor; Siregar, Reza Y.
    Abstract: Our study brings into light the evidence of a fundamental role of the Chinese renminbi in shaping the exchange rate behavior of other major Asian currencies. We obtain results suggesting that there is an additional dimension to the ‘fear of appreciation’ or ‘fear of floating in-reverse’ behavior, initially coined by Levy-yeyati and Sturzenegger (2007)with regards to the cases of these major Asian currencies. In particular, we find that there is a greater degree of aversion to appreciation of these same Asian currencies, specifically, the Philippine peso and the Thailand baht against the renminbi than against the US dollar. This heightened fear of appreciation against the Chinese currency confirms that trade competition indeed matters in this part of the world and that the fear continues to play a central role in the exchange rate management behavior of major Asian currencies. This is understandable as the rising role of China as a major trading hub in the region as well as globally, must then render the renminbi to exert a significant influence to the rest of the currencies in the region.
    Keywords: Asymmetrical Exchange Rate Regime; East and Southeast Asia; Regime Switching Models
    JEL: E58 F41 F31
    Date: 2010–09–24
  4. By: Chia-Lin Chang (Department of Applied Economics, National Chung Hsing University); Thanchanok Khamkaew (Faculty of Economics, Maejo University); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University); Roengchai Tansuchat (Faculty of Economics, Maejo University)
    Abstract: Asia is presently the most important market for the production and consumption of natural rubber. World prices of rubber are not only subject to changes in demand, but also to speculation regarding future markets. Japan and Singapore are the major futures markets for rubber, while Thailand is one of the world’s largest producers of rubber. As rubber prices are influenced by external markets, it is important to analyse the relationship between the relevant markets in Thailand, Japan and Singapore. The analysis is conducted using several alternative multivariate GARCH models. The empirical results indicate that the constant conditional correlations arising from the CCC model lie in the low to medium range. The results from the VARMA-GARCH model and the VARMA-AGARCH model suggest the presence of volatility spillovers and asymmetric effects of positive and negative return shocks on conditional volatility. Finally, the DCC model suggests that the conditional correlations can vary dramatically over time. In general, the dynamic conditional correlations in rubber spot and futures returns shocks can be independent or interdependent.
    Keywords: Multivariate GARCH, volatility spillovers, conditional correlations, spot returns, futures returns
    JEL: C22 C32 G32 Q14
    Date: 2010–09
  5. By: Medalla, Erlinda M.; Balboa, Jenny D.
    Abstract: The Asia and Pacific region and Latin American and Caribbean region are two regions divided not only by vast geographic distance, but also by disparities in economics, politics, culture, and history. Most recently, a number of forums explored the possibility of closing such gaps and linking the two regions through various trade and investment initiatives. The opportunities for cooperation abound and could touch on areas that will improve the regional value chain and enhance the innovation and competitiveness of both regions. Interregional cooperation could also help the two regions seek ways to deal with the current global economic crisis through a range of opportunities to stimulate the economy. This paper explores the potential for regional cooperation between the Asia and Pacific region and Latin America and the Caribbean. It also provides some recommendations to enhance the economic partnership of the two regions.
    Keywords: regional cooperation, Philippines, Latin America, free trade agreement (FTA), economic partnership, East Asia, Asian regionalism, Caribbean
    Date: 2010
  6. By: Jihad Dagher
    Abstract: This paper proposes a tractable Sudden Stop model to explain the main patterns in firm level data in a sample of Southeast Asian firms during the Asian crisis. The model, which features trend shocks and financial frictions, is able to generate the main patterns observed in the sample during and following the Asian crisis, including the ensuing credit-less recovery, which are also patterns broadly shared by most Sudden Stop episodes as documented in Calvo et al. (2006). The model also proposes a novel explanation as to why small firms experience steeper declines than their larger peers as documented in this paper. This size effect is generated under the assumption that small firms are growth firms, to which there is support in the data. Trend shocks when combined with financial frictions in this model also generate strong leverage effects in line with what is observed in the sample, and with other observations from the literature.
    Keywords: Stock prices , Southeast Asia , Borrowing , Financial crisis , External shocks , Capital flows , Credit , Current account ,
    Date: 2010–07–29
  7. By: Chia-Lin Chang (Department of Applied Economics, National Chung Hsing University); Thanchanok Khamkaew (Faculty of Economics, Maejo University); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University)
    Abstract: This paper analyzes the responsiveness of Thai outbound tourism to East Asian destinations, namely China, Hong Kong, Japan, Taiwan and Korea, to changes in effective relative price of tourism, total real total tourism expenditure, and one-off events. The nonlinear and linear Almost Ideal Demand (AID) models are estimated using monthly data to identify the price competitiveness and interdependencies of tourism demand for competing destinations in both long run (static) and short run error correction (dynamic) specifications. The homogeneity and symmetry restrictions are imposed on the long run and short run AID models to estimate the elasticities. The income and price elasticities provide useful information for public and private tourism agents at the various destinations to maintain and improve price competitiveness. The empirical results show that price competitiveness is important for tourism demand for Japan, Korea and Hong Kong in the long run, and for Hong Kong and Taiwan in the short run. With regard to long run cross-price elasticities, the substitution effect can be found in the following pairs of destinations: China-Korea, Japan-Hong Kong, Taiwan-Hong Kong, Japan-Korea, and Taiwan-Korea. The complementary effect can be found in the following pairs of destinations: China-Hong Kong, China-Japan, China-Taiwan, Japan-Taiwan, and Korea-Hong Kong. Contrary to the findings obtained from the long run AID specification, Japan-Korea and Taiwan-Korea are complements in the short run. Furthermore, China’s share of real total tourism expenditure is inelastic in response to a change in real total tourism expenditure, while Korea’s share of real total tourism expenditure is most sensitive to changes in expenditure in the long run. The greatest impact on the share of real total tourism expenditure in the short run is tourism demand for Taiwan.
    Keywords: Almost Ideal Demand (AID) model, tourism demand, price competitiveness, substitutes, complements, budget shares, error correction
    JEL: C3 C5 D12 L83
    Date: 2010–09
  8. By: Edwin M. Truman (Peterson Institute for International Economics)
    Abstract: This paper addresses the agenda for the Group of Twenty (G-20) leaders' meeting in Seoul, Korea in November 2010. This is an opportunity and challenge for Asian leaders in particular. Their test will be, first, to demonstrate that they can responsibly advance economic recovery. They must also deliver on institutional reform, in particular of the International Monetary Fund (IMF). Author Edwin M. Truman advocates a substantial expansion of the IMF's role as lender of last resort that is integrated with the surveillance role of the IMF in the form of comprehensive prequalification for IMF assistance and policy advice and a substantial increase in the IMF's financial resources. Truman also propose an approach to meaningful reform of the distribution of IMF quotas along with limiting European seats on the IMF executive board.
    Keywords: International Monetary Fund, Group of Twenty G20, China, Korea, Asia, special drawing rights, economic growth, exchange rates
    JEL: F02 F32 F33 F42 F53
    Date: 2010–09
  9. By: Jesus Felipe
    Abstract: The global crisis of 2007–09 affected developing Asia largely through a decline in exports to the developed countries and a slowdown in remittances. This happened very quickly, and by 2009 there were already signs of recovery (except on the employment front). This recovery was led by China’s impressive performance, aided by a large stimulus package and easy credit. But China needs to make efforts toward rebalancing its economy. Although private consumption has increased at a fast pace during the last decades, investment has done so at an even faster pace, with the consequence that the share of consumption in total output is very low. The risk is that the country may fall into an underconsumption crisis. Looking at the medium and long term, developing Asia’s future is mixed. There is one group of countries with a highly diversified export basket. These countries have an excellent opportunity to thrive if the right policies are implemented. However, there is another group of countries that relies heavily on natural resources. These countries face a serious challenge, since they must diversify.
    Keywords: Asia; China; Global Crisis; Open Forest
    JEL: E61 O11 O53 O57
    Date: 2010–09
  10. By: Ron Jarmin; C.J. Krizan
    Abstract: Because the ability of entrepreneurs to start their own businesses is key to the success of the U.S. economy and to the economic mobility of many disadvantaged demographic groups, understanding why entrepreneurship activity varies across groups and geography is an increasingly important issue. As a step in this direction we employ a novel set of metrics of business success to the growing literature and find great variation across groups and metrics. For example, we find that black-owned firms grow slower than white or Asian-owned firms. However, once we condition on firm survival, the differences disappear. Interestingly, we also find differences across groups in their start-up histories. For example, Asian-owned firms are less likely than white-owned firms to have started-out as nonemployers but firms owned by all other minority groups, as well as women-owned firms, are more likely to start-out without employees.
    Date: 2010–09
  11. By: NGUYEN Huyen Diu (National Graduate Institute for Policy Studies); Wade D. Pfau (National Graduate Institute for Policy Studies)
    Abstract: Understanding the money demand function is highly important for monetary policy implementation, especially in a monetary targeting framework. The paper uses cointegration analysis and a reduced-form short-run error correction model to investigate the demand for money in Vietnam between 1999 and 2009. We find evidence for a cointegrating relationship between the real money demand, income, the foreign interest rate, and the real stock price. More importantly, statistical tests show that real money demand in Vietnam is stable in this period.
    Keywords: International Diversification, Utility Maximization, EPF, Hypothetical Worker, Modern Portfolio Theory, Sri Lanka
    JEL: E41 E58 C23
    Date: 2010–09
  12. By: Stephen C. Smith; M. Shahe Emran (Department of Economics/Institute for International Economic Policy, George Washington University); Fenohasina Maret (Department of Economics, George Washington University)
    Abstract: Using household data from Vietnam, we provide evidence on the causal effects of education on freedom of spouse choice. We use war disruptions and spatial indicators of schooling supply as instruments. The point estimates indicate that a year of additional schooling reduces the probability of an arranged marriage by about 14 percentage points for an individual with 8 years of schooling. We also estimate bounds that do not rely on the exact exclusion restrictions (lower bound is 6-7 percentage points). The impact of education is strong for women, but much weaker for men.
    Keywords: Arranged Marriage, Education, Schooling, Freedom of choice, Development, Vietnam, Social Interactions
    JEL: I2 O12 D1 J12
    Date: 2009–11
  13. By: Figuié, M.; Mayer, J.
    Abstract: We use the "symbolic contagion" concept (Rozin and Nemeroff, 1994) and its adaptation to the food modernization framework by Fischler (1994) to analyse the interactions between quality signs and points of sales -street vending, formal and informal open-air market and supermarket- in consumers trust. Our study is based on the empirical case of Hanoi consumers (Vietnam) and vegetables safety. Food safety issues and trust building process in the Vietnamese food chain have changed dramatically during the last years. Quality sign on vegetables can improve consumers trust. But this effect is limited: with or without quality sign, vegetables sold on informal markets are the less trusted ones, and the ones sold in supermarkets are the most trusted. Trust in supermarkets is not linked to consumers purchasing habits. It is partly based on a process of symbolic de-contagion. This is linked to their ability, in a communist country, to symbolize modernity and access to mass consumption after decades of food shortage and political isolation. ...French Abstract : Nous basant sur le concept de contamination symbolique de Rozin et Nemeroff (1994) et sa mobilisation dans le contexte de la modernisation de l'alimentation par Fischler (1994), nous analysons les interactions entre labels et points de vente dans la construction de la confiance des consommateurs. Nous appliquons ce cadre d'analyse aux consommateurs de Hanoi et à la qualité sanitaire des légumes commercialisés. Ce contexte est marqué par d'importants bouleversements à la fois dans les risques sanitaires auxquels ont à faire face les consommateurs, comme dans les points d'appui dont disposent ces derniers pour faire leur choix. Nous montrons que si le label de qualité mis en place pour garantir la qualité sanitaire des légumes permet de renforcer la confiance des consommateurs, cet effet est cependant d'intensité limitée et variable selon les contextes. En particulier, il ne permet pas de modifier la hiérarchie des lieux de confiance. Avec ou sans signes de qualité, les légumes vendus en supermarchés bénéficient de la confiance maximale, ceux vendus sur les marchés informels de la confiance minimale. Cette confiance dans les supermarchés est indépendante de l'expérience des consommateurs. Elle est en grande partie explicable par le pouvoir de décontamination symbolique dont ils jouissent. Ce pouvoir est lié à l'image dont bénéficient les supermarchés, à la fois symbole de la modernisation de ce pays communiste, et de l'accès à la société de consommation mondiale après des décennies de pénurie et d'isolement.
    JEL: D1 D18 O17 P36
    Date: 2010

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