nep-sea New Economics Papers
on South East Asia
Issue of 2011‒02‒05
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Impact of Monetary Policy on Financial Markets in Small Open Economies: More or Less Effective During the Global Financial Crisis? By Pennings, Steven; Ramayandi, Arief; Tang, Hsiao Chink
  2. Processing Trade, Exchange Rates and China’s bilateral Trade Balances By Yuqing Xing
  3. Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis By Islam, Faridul; Shahbaz, Muhammad; Alam, Mahmudul
  4. Can we rely on cash transfers to protect dietary diversity during food crises ? estimates from Indonesia By Skoufias, Emmanuel; Tiwari, Sailesh; Zaman, Hassan
  5. Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia By Paul Dower; Elizabeth Potamites
  6. Economic Factors Contributing to Time-Varying Conditional Correlations in Stock Returns By Nagayasu, Jun
  8. Using repeated cross-sections to explore movements in and out of poverty By Lanjouw, Peter; Luoto, Jill; McKenzie, David
  9. Design and implementation of environmental performance rating and public disclosure programs : a summary of issues and recommendations based on experiences in East Asian countries By Gozun, Elisea G.; Laplante, Benoit; Wang, Hua
  10. Activity diversification and performance of Islamic banks in Malaysia By CHATTI, Mohamed Ali; KABLAN, Sandrine; YOUSFI, Ouidad
  11. Caste, local networks and lucrative jobs: Evidence from rural Nepal By Magnus Hatlebakk; Vegard Iversen; Gaute Torsvik
  12. Carbon Emission Trading Scheme and the Aviation Sector: An experimental analysis on allocation of allowances By Anthony T H Chin; Zhang Peng

  1. By: Pennings, Steven (Department of Economics); Ramayandi, Arief (Asian Development Bank); Tang, Hsiao Chink (Asian Development Bank)
    Abstract: This paper estimates the impact of monetary policy on exchange rates and stock markets for eight small open economies: Australia, Canada, the Republic of Korea, New Zealand, the United Kingdom, Indonesia, Malaysia and Thailand. On average across these countries, a one percentage point surprise rise in official interest rates leads to a 1% appreciation of the exchange rate and a 1% fall in stock market indices. The effect on exchange rates is notably weaker in the non-Organization for Economic Cooperation and Development (OECD) countries with a managed float. For the OECD countries, there is no robust evidence of a change in the effect of policy during the global financial crisis. For the non-OECD countries, there is some evidence of a stronger effect of policy on stock markets during the crisis, although further research is needed to investigate whether this is a result of measurement issues.
    Keywords: Monetary policy effectiveness; exchange rate; stock prices; crisis; Asian economies
    JEL: E44 E52 G14
    Date: 2011–01–01
  2. By: Yuqing Xing (National Graduate Institute for Policy Studies)
    Abstract: This paper analyzed the role of processing trade in China’s bilateral trade balances and the impact of the yuan’s appreciation on processing trade. The analysis is based on a panel data covering China’s 51 major trading partners from 1993-2008. The empirical analysis shows that: (1) processing trade accounted for 100% of China’s overall trade surplus and could explain most of China’s bilateral trade balances; (2) China’s processing trade shows a significant regional bias. While China has maintained a surplus with all G-7 countries in processing trade, it has run a significant deficit with most of East Asian economies; (3) East Asian economies are major sources and account for 77% of China’s processing imports. The econometric analysis reveals that processing imports from East Asian is eleven times of that from other regions; (4) the response of processing imports to the yuan’s appreciation differs with that of normal trade. Specifically, a 10% real appreciation of the yuan will reduce rather than increase China’s processing imports by 3.9%. Given that processing exports will decrease 9.6% for the same appreciation and China’s trade surplus is mainly generated from processing trade, a moderate appreciation of the yuan would have a very limited impact on China’s trade balance.
    Keywords: Processing Trade, Exchange Rates, China
    Date: 2011–01
  3. By: Islam, Faridul; Shahbaz, Muhammad; Alam, Mahmudul
    Abstract: Despite a bourgeoning literature on the existence of a long-run relationship between energy consumption and economic growth, the findings have failed to establish clearly the direction of causation. A growing economy needs more energy, which is exacerbated by growing population. Evidence suggests that financial development can reduce overall energy consumption by achieving energy efficiency. Economic growth and energy consumption in Malaysia have been rising in tandem over the past several years. The three public policy objectives of Malaysia are: economic progress, population growth and financial development. It is of interest to the policymakers to understand the dynamic interrelation among the stated objectives. The paper implements Auto Regressive Distributed Lag (ARDL) approach to cointegration to examine the existence of a long-run relationship among the series: energy consumption, population, aggregate production, and financial development for Malaysia; and tests for Granger causality within the Vector Error Correction Model (VECM). The results suggest that energy consumption is influenced by economic growth and financial development, both in the short and the long-run, but the population-energy relation holds only in the long run. The findings have important policy implications for balancing economic growth vis-à-vis energy consumption for Malaysia, as well as other emerging nations.
    Keywords: Financial development; Energy consumption; ARDL; Economic growth
    JEL: C32 Q20 O52 Q43
    Date: 2011–01–19
  4. By: Skoufias, Emmanuel; Tiwari, Sailesh; Zaman, Hassan
    Abstract: The 2008"food price crisis"and more recent spikes in food prices have led to a greater focus on policies and programs to cushion their impact on poverty and malnutrition. Estimating the income elasticity of micro-nutrients and assessing how they change during such crises is an important part of the policy debate as it affects the effectiveness of cash transfer and nutritional supplementation programs. This paper assesses these issues using data from two cross-sectional household surveys in Indonesia carried out before and soon after the 1997/98 economic crisis, which led to a sharp increase in food prices. First, the authors examine how the income elasticity of the starchy staple ratio differs between the two survey rounds using non-parametric as well as regression methods. Second, they provide updated estimates of the income elasticity for important nutrients in Indonesia. The analysis finds that (i) summary measures such as the income elasticity of the starchy staple ratio may not change during crises but this masks important differences across specific nutrients; (ii) methods matter -- the ordinary least squares estimates for the income elasticity of micro-nutrients are likely to be misleading due to measurement error bias; (iii) controlling for measurement error, the income elasticity of some key micro-nutrients, such as iron, calcium, and vitamin B1, is significantly higher in the crisis year compared with a normal year; and (iv) the income elasticity for certain micro-nutrients -- vitamin C in this case -- remains close to zero. These results suggest that cash transfer programs may be even more effective during crises to protect the consumption of many essential micro-nutrients compared with non-crisis periods but in order to ensure that all micro-nutrients are consumed, specific nutritional supplementation programs are also likely to be required.
    Keywords: Food&Beverage Industry,Nutrition,Rural Poverty Reduction,Economic Theory&Research,Inequality
    Date: 2011–01–01
  5. By: Paul Dower (New Economic School and the Center for Economic and Financial Research); Elizabeth Potamites
    Abstract: Many land titling programs have produced lackluster results in terms of achieving access to credit for the poor. This may re ect insucient empha- sis on local banking practices. Bankers commonly use sophisticated methods other than collateral to ensure repayment. Some methods rely on ex-ante in- formation ows and formal land titles can improve these ows by signaling to the bank important characteristics about borrowers. Using a household survey from Indonesia, we provide evidence that formal land titles do have a positive and significant eect on access to credit and at least part of this effect is best interpreted as an improvement in ex-ante information ows. This result stands in contrast to the prevailing notion that land titles only function as collateral. Analysts who neglect local banking practices may misinterpret the observed effect of systematic land titling programs on credit access because these programs tend to dampen the signaling value of formal land titles.
    Date: 2010–12
  6. By: Nagayasu, Jun
    Abstract: This paper attempts to find economic and financial factors contributing to the changing correlations of stock returns. Time-varying correlations were documented in previous studies, but a few attempts have been made to investigate their evolution. Using daily data from the Asia-Pacific region, this paper provides evidence that return correlations are negatively correlated with the distance between the markets. Furthermore, correlations tend to be higher in advanced countries and increase at times of the active trading (e.g., around the Lehman shock). Instead, the level of correlations declines among pairs of countries with less financial integration.
    Keywords: Conditional correlations; DCC
    JEL: G15 F36
    Date: 2010–12–01
  7. By: Christopher Edmonds (University of Hawaii at Manoa, CTAHR, Center on the Family); Yao Li (College of Management and Economics at University of Electronic Science and Technology of China)
    Abstract: This paper analyzes China’s trade relationships using a new trade intensity index, which incorporates gravity model estimation, to compare observed trade levels with levels would be expected to prevail given the economic, geographic, and cultural characteristics of the trading partners. The index is calculated to study China’s bilateral trade intensity, and uses Japan as a comparative case. Standard trade intensity index measures suggest China trades at a very intensive level with countries in East and Southeast Asia (ESA) and at a low level with countries in Europe (EU) and US-Canada (USC). The gravity model based index indicates that China’s level of trade with countries in the ESA region is consistent with levels that would be expected given the countries’ characteristics, while China’s level of trade with EU and USC are greater than one would expect given their characteristics. The new index also reveals insights regarding the evolution of China’s trade partners during the years 1988-2005. The paper’s results suggest the gravity model adjusted trade intensity index can provide a useful analytical tool for identifying strategic or other deviations in trade levels.
    Keywords: Gravity model, Trade Intensity Index, Bilateral Trade, China
    JEL: F14 F13 C43
    Date: 2010–12–12
  8. By: Lanjouw, Peter; Luoto, Jill; McKenzie, David
    Abstract: Movements in and out of poverty are of core interest to both policymakers and economists. Yet the measurement of such movements has been limited in many countries due to the lack of panel data. In this paper, the authors consider a method whereby repeated cross-sections of household survey data can be analyzed in such a way as to allow inferences to be made about movements in and out of poverty. Their approach builds on the methodology used to construct poverty maps. They suggest that this method lends itself also to the development of pseudo-panels which can be used to study questions about poverty duration and mobility that are of interest to policy makers but that are rarely pursued empirically due to data constraints. They illustrate that the method at best offers insights into approximate bounds of mobility, but argue that these bounds can, under ideal circumstances, be narrow enough to yield useful insights. They test how well the method works by sampling repeated cross-sections from genuine panel data sets for Vietnam and Indonesia and comparing their method to the panel estimates. The results are sufficiently encouraging to offer the prospect of some limited, basic insights into mobility and poverty duration in settings where historically it was judged that the data necessary for such analysis were unavailable.
    Keywords: Rural Poverty Reduction,Regional Economic Development,Achieving Shared Growth,Statistical&Mathematical Sciences
    Date: 2011–01–01
  9. By: Gozun, Elisea G.; Laplante, Benoit; Wang, Hua
    Abstract: A number of countries around the world have in recent years implemented environmental performance rating and public disclosure programs, and, where evidence is available, these programs have been shown to induce pollution reduction. Based on previous research and practical experiences from several Asian countries, this paper provides a systematic review and discussion of the practical issues involved in designing and implementing environmental performance rating and public disclosure programs, including the legal and institutional framework, scope and coverage determination, performance rating methodology, data collection and verification, disclosure strategy, credibility assurance, program set-up and expansion, etc. The authors offer comments and recommendations, where appropriate, for environmental regulators to tackle these practical issues. The reviews and discussions are intended to be concise, simple, and systematic, and alternative options are discussed in a succinct manner, so that they can be readily used by interested environmental regulators and researchers.
    Keywords: Environmental Economics&Policies,Brown Issues and Health,Water and Industry,Energy Production and Transportation,Environmental Governance
    Date: 2011–01–01
  10. By: CHATTI, Mohamed Ali; KABLAN, Sandrine; YOUSFI, Ouidad
    Abstract: The current paper analyzes the performance and the choice of portfolio in Islamic banks. We consider a sample of 8 Malaysian universal Islamic banks between 2004 and 2008. We use the Herfindahl-Hirschman Index (HHI) as an indicator of the degree of diversification. The performance of the banks is measured by the return on assets ratio (ROA) and the Risk Adjusted Return On Capital ratio (RAROC). Finally, we use the Modern Portfolio Theory (MPT) of Markowitz to define the efficient frontier and the optimal portfolio.The results show that the corporate and investment activity increases significantly returns on assets. However, retail and commercial activity improves the results and performance of these banks. We find evidence that the level of diversification is not too high and recommend that they become concentrated on just one type of these activities. Finally, the MPT supports the idea that Islamic banks are not efficient.
    Keywords: Diversification; performance; Islamic banks; Herfindhal Hirschmann Index; Modern Portfolio Theory.
    JEL: G11 C01 G21
    Date: 2010–01–23
  11. By: Magnus Hatlebakk; Vegard Iversen; Gaute Torsvik
    Abstract: We study how local connections to persons in influential positions affect access to lucrative international migrant jobs and attractive government employment. In rural Nepal, it would not be surprising if social status, captured by a household’s caste but also by wealth or education, strongly influenced or perhaps even exclusively determined the access to attractive labour market opportunities.  This is not the case. Although much of the variation in migration can be attributed to wealth, education and social identity, household networks have a separate impact on external employment. Well-connected households are more likely to get government jobs and appear to have favorable access to the manpower agencies and the informal loans required to finance migration to the Persian Gulf or Malaysia.  
    Date: 2010
  12. By: Anthony T H Chin (Department of Economics, National University of Singapore); Zhang Peng (Department of Economics, National University of Singapore)
    Abstract: The European Union has proposed a Directive to include aviation activities in the Emission Trading Scheme (ETS) in 2012. The allowance allocation method which will be put in place is relatively easy to implement with low administration cost. However, careful scrutiny suggests that the allocation method does not favor airlines with high energy efficiency. This study proposes an alternative allowance allocation method which is fairer in that it rewards energy efficient airlines. Further, the new method is easy to implement with low administrative cost. The Cournot model serves as the theoretical foundation upon which the experiments are designed to simulate the aviation industry under the ETS. The equilibrium is calculated for each allowance allocation method. Results from experiments suggest consistency with theoretical outcomes.
    Date: 2011–01

This nep-sea issue is ©2011 by Kavita Iyengar. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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