nep-sea New Economics Papers
on South East Asia
Issue of 2011‒01‒03
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Changing Impact of Fiscal Policy on Selected ASEAN Countries By Tang, Hsiao Chink; Liu, Philip; Cheung, Eddie C.
  2. The 2008 Financial Crisis and Potential Output in Asia: Impact and Policy Implications By Cyn-Young Park; Ruperto P. Majuca; Josef T. Yap
  3. Monetary Autonomy in Select Asian Economies: Role of International Reserves By Hiroyuki Taguchi; Geethanjali Nataraj; Pravakar Sahoo
  4. East Asian Financial and Monetary Cooperation and Its Prospect: Beyond the CMI By Young-Joon Park; Yonghyup Oh
  5. How Elastic is East Asian Demand for Consumption Goods? By Thorbecke, Willem
  6. EU-Asia Free Trade Areas? Economic and Policy Considerations By Michael G. Plummer
  7. Inflation Targeting and Pass-through Rate in East Asian Economies By Hiroyuki Taguchi; Woong-Ki Sohn
  8. The Evolution of Gender Wage Differentials and Discrimination in Thailand: 1991-2007--An Application of Unconditional Quantile Regression By Adireksombat, Kampon; Fang, Zheng; Sakellariou, Chris
  9. Prospects for Regional Cooperation between Latin America and the Caribbean Region and the Asia and Pacific Region: Perspective from East Asia* By Erlinda M. Medalla; Jenny D. Balboa
  10. Macroeconomic Interdependence in East Asia By Nagayasu, Jun
  11. Present and Projected Australian Coal Supply Capacity: Impacts of Global Recession and Expansion in Coal Exports to China By Koichi Koizumi; Hisaki Yokogoshi
  12. Development of Regional Production and Logistic Networks in East Asia: the Case of the Philippines By Mari-Len R. Macasaquit; Fatima Lourdes E. del Prado; Melalyn C. Mantaring; Michael R. Cabalfin
  13. The Role of the Private Sector in Regional Economic Integration: a View from the Philippines By Maureen Ane D. Rosellon; Josef T. Yap
  14. After the reforms: Determinants of wage growth and change in wage inequality in Vietnam: 1998-2008 By Sakellariou, Chris; Fang, Zheng
  15. Should SA Tour, A Singapore Travel company, Use External financing to Expand the MICE business in the China and Singapore markets? By Chang, Chia-Yu; Dinh, Tran Ngoc Huy; Benjamin, Pekaric
  16. The Effectiveness of Virtual R&D Teams in SMEs: Experiences of Malaysian SMEs By Ale Ebrahim, Nader; Ahmed, Shamsuddin; Abdul Rashid, Salwa Hanim; Taha, Zahari
  17. Assessing the Value of Krabi River Estuary Ramsar Site Conservation and Development By Penporn Janekarnkij;
  18. The Cultural Revolution, Stress and Cancer By Tilak Abeysinghe; Jiaying Gu

  1. By: Tang, Hsiao Chink (Asian Development Bank); Liu, Philip (Western Hemisphere Department); Cheung, Eddie C. (School of Arts and Social Sciences)
    Abstract: This paper investigates the effectiveness of fiscal policy in five Association of Southeast Asian Nations (ASEAN) of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Through a structural vector autoregression (VAR) model, government spending is found to have weak and largely insignificant impact on output, while taxes are found to have outcomes contrary to conventional theory. Extensions using a time-varying VAR model reveal the impact of taxes on output mainly reflect heightened concerns over public finances amid the Asian financial crisis and the recent global financial crisis. On the other hand, for Singapore and Thailand, there is evidence that government spending can at times be useful as a tool for countercyclical policy.
    Keywords: ASEAN; fiscal policy; structural VAR; time-varying VAR
    JEL: C11 E62 H20 H30
    Date: 2010–12–01
  2. By: Cyn-Young Park; Ruperto P. Majuca; Josef T. Yap (Philippine Institute for Development Studies)
    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 non-inflationary output growth. In this paper, we investigate the post-crisis 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 pre-crisis 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: Potential output, Markov-switching model, structural break, global crisis, East Asia
    JEL: C3 E32
    Date: 2010
  3. By: Hiroyuki Taguchi; Geethanjali Nataraj; Pravakar Sahoo (Policy Research Institute)
    Abstract: This paper examines the trends in monetary autonomy and its interaction with financial integration, currency regime and foreign reserves for the past two decades in select Asian countries viz., Thailand, Korea, Indonesia, Philippines, and India. Our main findings are as follows: First, Thailand, Korea and Indonesia, who experienced the change in currency regime towards a floating regime, have lowered the sensitivities of their interest rates (have raised monetary autonomy) after the regime change, while India without any change in currency regime has continued to raise the sensitivities of its interest rates (has lowered monetary autonomy) in line with increased financial integration. Second, in all sample economies, the accumulation of foreign reserves has contributed to retaining monetary autonomy in terms of preventing the sensitivities of interest rates from rising. We speculate that their accumulation might take a role as an anchor for monetary autonomy to the emerging market economies facing “fear of floating”.
    Keywords: monetary autonomy, financial integration, currency regime, foreign reserves, Asian emerging market economies, fear of floating
    JEL: E52 F33 F41
    Date: 2010
  4. By: Young-Joon Park; Yonghyup Oh (Korea Institute for International Economic Policy)
    Abstract: This paper examines the ASEAN+3 cooperation of regional financial safety nets, and reviews the regional monetary issues of a single currency and currency competition in East Asia. We point out potential systemic risks in East Asia and the importance of regional surveillance. ASEAN+3 regional surveillance should move forward to the stronger measures of peer review and peer pressure, and make the AMRO a well-resourced professional surveillance secretariat to create capacity to apply independent conditionality. To this effective surveillance mechanism, we propose to establish the Board of Coordination to support the ASEAN+3 ERPD by confirming its decision or remitting the relevant case to the ASEAN+3 ERPD and providing possible legal consultation. The institution building of the CMIM secretariat will accelerate the establishment of a regional monetary institution, e.g. an Asian Monetary Fund. The current crisis provides sufficient incentives for East Asian economies to pursue internationalization of their currencies, and it would open the possibility towards a single currency in East Asia.
    Keywords: Regional financial safety nets, surveillance mechanism, CMIM, ABMI
    JEL: E61 F36
    Date: 2010
  5. By: Thorbecke, Willem (Asian Development Bank Institute)
    Abstract: This paper investigates import demand in East Asia. Estimating exchange rate elasticities for countries in the region is difficult because many imports are used to produce goods for re-export. An exchange rate appreciation that reduces East Asian exports will also reduce the demand for imported inputs that are used to produce exports. To correct for this bias this paper examines the imports of consumption goods, since these are intended primarily for the domestic market. Results from several specifications indicate that currency appreciations and increases in income in East Asian countries would significantly increase consumption imports.
    Keywords: east asia demand; exchange rate elasticities; consumption goods
    JEL: F32 F41
    Date: 2010–12–22
  6. By: Michael G. Plummer (Asian Development Bank Institute)
    Abstract: In this paper, we analyzed key aspects of the changing economic relationship between the European Union (EU) and Asia, and explored the potential economic ramifications of deeper EU-Asian economic cooperation. We also investigated the possible costs to the EU of remaining “disengaged” from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. Our empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. We also presented two CGE models that estimated the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial equilibrium) approach, we argued that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. We therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia.
    Keywords: EU-Asian economic cooperation, multi-nested trade agreements, CGE, free trade area
    JEL: F13 F15
    Date: 2010
  7. By: Hiroyuki Taguchi; Woong-Ki Sohn (Policy Research Institute)
    Abstract: This article sets out to assess the performance of inflation targeting (IT) frameworks from the perspective of the pass-through effect of external price shocks into consumer price inflation, focusing on the four East Asian economies which have adopted IT, during the period of 1990-2009. We first examine their monetary policy rules to identify the IT implementation, and then investigate the linkage between inflation-responsive rules and pass-through rates, as suggested by Gagnon and Ihrig (2004). Our main findings are as follows. First, under the IT adoption, Korea has taken an inflation responsive rule in a forward-looking manner, while Indonesia and Thailand have adopted the rule in a backward-looking manner. Second, only Korea has lost pass-through under IT adoption, thereby showing the clear linkage between inflation-responsive rules and the loss of pass-through. Third, the sensitivity test of inflation expectations to import price shocks in Korea also supports this linkage. These findings imply that IT adoption, if conducted in a forward-looking manner, can be a resisting power against external price shocks, even in small, open, emerging market economies, as tested under the latest global financial crisis in Korea.
    Keywords: inflation targeting, pass-through, East Asian emerging market economies, policy reaction function, inflation expectations
    JEL: E52 F31 F41
    Date: 2010
  8. By: Adireksombat, Kampon; Fang, Zheng; Sakellariou, Chris
    Abstract: Using unconditional quantile regression combined with Oaxaca-Blinder decomposition, we study the gender wage differentials over the whole distribution in Thailand from 1991 to 2007. A V-shape pattern of the overall gender gap is observed in each year, most attributable to the wage structure effect (“discrimination”), and persistent sticky floors are documented. We also develop a “double decomposition” method to analyze the over-time changes in gender wage gaps, and find that the degree of gender inequality in the Thai labor market has improved compared to the 1990s, while relative changes in characteristics explained only very small part of the total changes.
    Keywords: Southeast Asia; Thailand; unconditional quantile regression; sticky floors; discrimination
    JEL: J71 C31 J16
    Date: 2010–09
  9. By: Erlinda M. Medalla; Jenny D. Balboa (Philippine Institute for Development Studies)
    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: regionalism, fora, economic cooperation,
    JEL: F00 F15
    Date: 2010
  10. By: Nagayasu, Jun
    Abstract: This paper analyzes macroeconomic interdependence among 10 Asian economies. In this connection, we decompose their macroeconomic activities (real GDP) into common and country-specific components using the Bai-Ng method (2004). Our results suggest first that both components are nonstationary and have permanent effects on their overall economy. Second, we find the relative importance of common factors in all countries in terms of their contribution to variations in real GDP. But evidence is also obtained of country-specific effects becoming increasingly important in countries like China in recent years. Therefore, if, for example, China is expected to grow at a fast pace in future, our findings imply that creation of a regional monetary union of these 10 countries needs to be held back until the Chinese economy has become more dominant in the region.
    Keywords: Asian economic integration; factor models; common and factors
    JEL: F4
    Date: 2010–04–01
  11. By: Koichi Koizumi; Hisaki Yokogoshi (The Institute of Energy Economics, Japan)
    Abstract: Australia’s coal exports in 2008 totaled 252 million tons, accounting for 26.9% of global coal trade (in terms of exports) at 938 million tons. Although Indonesia has expanded its coal exports over recent years and reported exports in 2008 at 203 million tons, Australia has remained unshaken as the world’s largest coal exporter. Coal demand in Japan and European industrial countries has plunged on the global financial/economic crisis since the autumn of 2008. Their coal imports have thus declined. But China has expanded coal demand on the strength of high economic growth and increased coal imports more rapidly than earlier due to high domestic coal prices. Australia’s coal exports have maintained an upward trend even amid the global recession. In response to growing coal demand, new coalfield development and other projects are planned to expand production in Australia. This report considers the past results and future projections of Australia’s coal production and exports and its future coal supply capacity including estimated output under new coalmine development projects. It also covers the realities of a sharp increase in Australia’s coal exports to China in 2009.
    Keywords: coal exports, Australia, Japan
    JEL: O13
    Date: 2010
  12. By: Mari-Len R. Macasaquit; Fatima Lourdes E. del Prado; Melalyn C. Mantaring; Michael R. Cabalfin (Philippine Institute for Development Studies)
    Abstract: Regional production networks and local production linkages are important not only for the generation of industrial activity through investment flows but also as essential sources of new information and technology. Complementing this are the so-called knowledge networks within or around industrial agglomerations that are equally important sources of technology for industrial upgrading and innovation. Both are present in the case study area of CALABARZON in the Philippines but the former seem to be more apparent than the latter as this has been characterized as weak based on secondary data and conduct of survey of establishments. With weaknesses in the S&T system in the country as part of the study’s findings, policy suggestions were provided to strengthen the linkages that remain to be wanting but are important for stimulating innovation.
    Keywords: production linkages, Philippines, logistic networks
    JEL: D20
    Date: 2010
  13. By: Maureen Ane D. Rosellon; Josef T. Yap (Philippine Institute for Development Studies)
    Abstract: The private sector is the driver of growth in most ASEAN economies. It is therefore expected to play a significant role in the process of economic integration in ASEAN. In the Philippines, the private sector has dominated the economy, contributing about 95 percent of GDP, but it has not lived up to its potential. Unlike other economies in East Asia, the Philippines did not experience the anticipated private sector participation and economic transformation that accompany the openness model of development. The ASEAN Economic Community is an extension of this paradigm. Philippine-based firms are found to have low utilization of arrangements in the ASEAN free trade agreement and private sector investment as a percentage of GDP is observed to be relatively low and to have consistently declined since 2000. This paper seeks to explain the reasons for the Philippines’ relatively weak private sector response to the opportunities provided by greater openness and deepening regional economic integration. The paper cites some factors which include structural supply-side constraints and institutional weaknesses. Some of these factors are extraneous to the private sector but some emanate from the behavior of the private sector. These factors are expected to mitigate the impact of policies related to establishment of the AEC. However, there are pockets of success as a result of move towards the AEC such as the launch of the National Single Window.
    Keywords: ASEAN, Philippines, private sector, free trade agreements
    JEL: F13
    Date: 2010
  14. By: Sakellariou, Chris; Fang, Zheng
    Abstract: The Vietnam ―renovation‖ reforms were implemented during the 1990s, but their full effect was only felt many years later. We present evidence on the developments in real wage growth and inequality in Vietnam from 1998 to 2008. For men, wage growth was underpinned by both increases in endowments of productive characteristics (mainly education) as well as changes in the wage structure (mainly associated with experience) and residual changes. For women, the wage structure effect was the main contributor to wage growth and the most important determinant was the change in the pattern of the returns to experience: younger, less experienced workers enjoyed a premium compared to more experience workers, reversing the previous, opposite pattern. Conventional measures of inequality as well as background analysis show that wage inequality decreased sharply through the 1990s until 2006, but increased subsequently. Over the entire 10-year period, wage inequality increased slightly and more so for women.
    Keywords: Wage inequality; counterfactual decompositions; Asia; Vietnam
    JEL: D31 J31
    Date: 2010–09
  15. By: Chang, Chia-Yu; Dinh, Tran Ngoc Huy; Benjamin, Pekaric
    Abstract: Based on our empirical analysis on China potential MICE (Meeting-Incentive-Conference-Exhibition) market, we have come to these results: Firstly, China is an emerging market with the total population is reaching to a one-fifth ratio among total world’s population. Secondly, the Chinese cultural community feature is highly valued. And last but not least, the number of Chinese business travel overseas is continuous increasing, as our customer analysis pointed out, these are certainly good signals for a potential MICE business opportunity. Besides the market analysis, this paper aims to analyze the strength and weakness of a typical traveling company such as SA Tour, a real Singapore traveling company, we found out that SA’s strength is brand awareness and package tours. This will contribute to the development of its business services and products which we also discuss in the marketing strategy in detail in later session. Next, A real case analysis can not be done without considering the context or environment analysis. So, our methodology is performing a total company analysis combined with a focusing market analysis in China, then, we also used a hypothetical financial model with assumed variables from commercial banks to estimate this project results. In conclusion, the positive Net Present Value (NPV) from the project and good performance of SA Tour in current business, plus the good signals from an increasing and emerging China market in Asia are sound evidence for us to suggest that The Board of Management of The Company should consider a next implementation plan to make this project become feasible. Finally, we also include in this paper performing a total marketing strategy to support for SA Tour to consider before it goes into the action. It is also considered as an analysis of a market expansion strategy for SA Tour before entering the new potential market, The People’s Republic of China.
    Keywords: Strategic management; marketing strategy; project finance; market expansion theory; business strategy
    JEL: F20 L20 L10 M10
    Date: 2010–12–12
  16. By: Ale Ebrahim, Nader; Ahmed, Shamsuddin; Abdul Rashid, Salwa Hanim; Taha, Zahari
    Abstract: The number of small and medium enterprises (SMEs), especially those involved with research and development (R&D) programs and employed virtual teams to create the greatest competitive advantage from limited labor are increasing. Global and localized virtual R&D teams are believed to have a high potential for SMEs growth. Due to the fast growing complexity of the new product, coupled with new emerging opportunities of virtual teams, a collaborative approach is believed to be the future trend. This research explores the effectiveness of virtuality in SMEs virtual R&D teams. An online questionnaire emailed to Malaysian manufacturing SMEs and 74 usable questionnaires were received, representing a 20.8 percent return rate. To avoid the bias that may result from pre-suggested answer, a series of open-ended questions asked from expertise. This study based on analyzing an open-ended question; extract four main themes among expertise recommendations on the effectiveness of virtual teams for SMEs growth and performance. These are suitable for SMEs new product design manager to realize the key advantage and importance of virtual R&D teams in the process of NPD, which lead to increase the effectiveness of the new product's procedure.
    Keywords: Virtual teams; New product development; Survey finding; Small and medium Enterprises.
    JEL: G14 O32 M12 L7 M11 M1 O3 L15 P4
    Date: 2010–06
  17. By: Penporn Janekarnkij (Department of Agricultural and Resource Economics,Faculty of Economics,Kasetsart University,Thailand);
    Abstract: Krabi River Estuary, a ramsar site located in southern Thailand, is dominated by two major natural vegetation assemblages, i.e. mangrove forests and seagrass beds. According to the cluster development strategy, the cabinet has approved in principle to develop Krabi as the global marine tourism center and economic gateway of Asia. This study aimed to assess the economic value of the site, using market price and benefit transfer. The impact on economic activities with the 5% annual decline of mangrove forests was evaluated. The estimated annual use value of the site was $9.7 million for recreation and tourism. The economic value of mangrove forests was $758/ha. The net present value of mangrove forests was $73.1 million based on 7% discount rate and 15-year time line. An approximate impact of mangrove change follows the study of Ruitenbeek (1992). It was assumed that the impact on local direct resource extraction and loss in biodiversity would occur at the year after the depletion of the forest. The impact on the productivity of local fishery would occur in the fifth year and on tourism in the tenth year. Thus, value loss of mangrove at the annual rate of 5% in the net present term became $21.0 million or $2.3 million per year. The results imply that a development project that causes the same rate of mangrove destruction must generate a least an income of $2.3 million per year to be considered as an economically feasible project.
    Keywords: Krabi River Estuary,ramsar site,wetland management,economic valuation,direct use values
    JEL: Q51 Q57
    Date: 2010–10
  18. By: Tilak Abeysinghe; Jiaying Gu (Singapore Centre for Applied and Policy Economics)
    Abstract: The link between mental stress and cancer is still a belief, not a well established scientific fact. Scientists have relied largely on opinions of cancer stricken patients to establish a link between stress and cancer. Such opinion surveys tend to produce contradictory statistical inferences. Although it is difficult to conduct scientific experiments on humans similar to those on animals, human history is replete with “experiments” that have caused enormous stress on some human populations. The objective of this exercise is to draw evidence from one such massive experiment, the Cultural Revolution in China. Cancer data from Shanghai analyzed through an age period cohort technique show very strong evidence in support of the hypothesis that mental stress causes cancer.
    Keywords: cultural revolution, cancer, stress, health economics
    JEL: I10
    Date: 2010

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