nep-sea New Economics Papers
on South East Asia
Issue of 2011‒12‒19
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Australia and the Future of the Trans-Pacific Partnership Agreement By Shiro Armstrong
  2. Did the US macroeconomic conditions affect Asian stock markets? By Seema Narayan; Paresh Kumar Narayan
  3. Distribution, Domestic Politics and Monetary Cooperation in East Asia By Hamilton-Hart, Natasha
  4. The Economic Crisis: Did Financial Supervision Matter? By Donato Masciandaro; Rosaria Vega Pansini; Marc Quintyn
  5. Inflation Dynamics in Asia: Causes, Changes, and Spillovers from China By D. Filiz Unsal; Carolina Osorio
  6. Should Indonesia Suffer from More Reduction of the Subsidy to the Petroleum Sector? By Agus Budiyono; Ryuta Ray Kato
  7. Transport modal choice by multinational firms : firm-level evidence from Southeast Asia By Hayakawa, Kazunobu; Tanaka, Kiyoyasu; Ueki, Yasushi
  8. A counterfactual decomposition analysis of immigrants-natives earnings in Malaysia By Anees, Muhammad; Sajjad, Muhammad; Ahmed, Ishfaq
  9. Effectiveness of Capital Controls in Selected Emerging Markets in the 2000s By Annamaria Kokenyne; Chikako Baba
  10. Linking External Sector Imbalances and Changing Financial Instability before the 2008 Financial Crisis By John Whalley; Manmohan Agarwal; Jing Wang; Sean Walsh; Chen Yan
  11. China’s Emergence in the World Economy and Business Cycles in Latin America By Ambrogio Cesa-Bianchi; M. Hashem Pesaran; Alessandro Rebucci; TengTeng Xu
  12. Social Housing Policies in Latin America and Singapore: Lessons for China By Roger Sandilands
  13. Trading Away Wide Brands for Cheap Brands By Swati Dhingra

  1. By: Shiro Armstrong (Australian National University)
    Abstract: The Trans-Pacific Partnership (TPP) Agreement aims to be a high quality, 21st Century economic agreement that furthers economic integration in the Asia Pacific. In late 2011 it remains unclear whether the TPP will turn out to be a stepping stone or stumbling block towards regional or global economic integration. The current negotiations involve Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam with Japan, Mexico and Canada expressing interest in joining. The potential economic and political significance of the TPP depends on the expansion of the membership to include Japan, Korea, Indonesia, other East Asian economies, and especially China, as well as the ultimate quality of any agreement. Including additional members will be difficult after a deal is concluded among the original members and partners with whom they are currently in negotiation, especially if the content of the agreement and the accession criteria are not designed carefully and specifically with additional membership in mind. Desirably TPP will contribute to the global system by making it easier for others to join. That includes multilateralising preferences within the TPP, and eventually extending that treatment to non-members. Importantly, the agenda of negotiations needs to focus on reducing regulatory and institutional, behind-the-border barriers to trade and commerce. Focus on strengthening intellectual property rights, including stringent labour and environmental and other so called "platinum" standards will make it difficult for many members and non-members to participate fully. The TPP has the potential to keep the United States engaged in the region but complications will arise with a TPP to which China is not party, or an inward looking East Asian arrangement to which the United States is not party. A regional arrangement that does not include both the United States and China is more likely to disrupt than to contribute to regional trade and prosperity.
    Keywords: Trade agreements, economic integration, TPP
    JEL: F02 F13 F15
    Date: 2011–12
  2. By: Seema Narayan; Paresh Kumar Narayan
    Abstract: The aim of this paper is to examine the impact of US macroeconomic conditions—namely, exchange rate and short-term interest rate—on the stocks of seven Asian countries (China,India, the Philippines, Malaysia, Singapore, Thailand, and South Korea). Using daily data for the period 2000 to 2010, we divide the sample into pre-crisis period (pre-August 2007) and crisis period (post-August 2007) we find that in the short-run interest rate has a statistically insignificant effect on returns for all countries except the Philippines in the crisis period,while except for China, regardless of the crisis, depreciation had a statistically significant negative effect on returns. When the long-run relationship among the variables is considered,for four of the seven countries (India, Malaysia, Philippines, Singapore, and Thailand) while there was cointegration in the pre-crisis period, in the crisis period there was no such relationship, implying that the financial crisis has actually weakened the link between stock prices and economic fundamentals.
    Keywords: Interest Rate; Exchange Rate; Financial Crisis; Depreciation
    Date: 2011–11–21
  3. By: Hamilton-Hart, Natasha (Asian Development Bank Institute)
    Abstract: Since the financial crises of 1997, East Asia has made modest but nonetheless significant steps towards greater regional integration and cooperation in the areas of finance and trade, accompanied by progress on institution-building at the regional level. Monetary cooperation, however, has not proceeded to anything like even the modest levels registered for other functional areas of cooperation. This paper investigates this discrepancy. It asks whether monetary cooperation is simply an unattractive proposition because it promises fewer net gains than cooperation on other issues, or whether there are other explanations for the absence of monetary cooperation in the region.
    Keywords: regional integration; east asia; monetary cooperation
    JEL: E50 F30 F50
    Date: 2011–12–08
  4. By: Donato Masciandaro; Rosaria Vega Pansini; Marc Quintyn
    Abstract: The Asian financial crisis marked the beginning of worldwide efforts to improve the effectiveness of financial supervision. However, the crisis that started in 2007–08 was a crude awakening: several of these improvements seemed unable to avoid or mitigate the crisis. This paper brings the first systematic analysis of the role of two of these efforts - modifications in the architecture of financial supervision and in supervisory governance - and concludes that they were negatively correlated with economic resilience. Using the emerging distinction between macro- and micro-prudential supervision, we explore to what extent two separate institutions would allow for more checks and balances to improve supervisory governance and, thus, reduce the probability of supervisory failure.
    Keywords: Asia , Bank supervision , Banks , Central bank role , Cross country analysis , Financial crisis , Financial sector ,
    Date: 2011–11–11
  5. By: D. Filiz Unsal; Carolina Osorio
    Abstract: The perception that Asia’s inflation dynamics is driven by idiosyncratic supply shocks implies, as a corollary, that there is little scope for a policy reaction to a build-up of inflationary pressures. However, Asia’s fast growth and integration over the last two decades suggest that the drivers of inflation may have changed, and that domestic demand pressures may now play a larger role than in the past. This paper presents a quantitative analysis of inflation dynamics in Asia using a Global VAR (GVAR) model, which explicitly incorporates the role of regional and global spillovers in driving Asia’s inflation. Our results suggest that over the past two decades the main drivers of inflation in Asia have been monetary and supply shocks, but also that, in recent years, the contribution of these shocks has fallen, whereas demand-side pressures have started to emerge as an important contributor to inflation in Asia.
    Keywords: Asia , China , Commodity prices , Cross country analysis , Demand , Economic models , Inflation , Spillovers ,
    Date: 2011–11–08
  6. By: Agus Budiyono (Ministry of Internal Affairs of Indonesia); Ryuta Ray Kato (International University of Japan)
    Abstract: We numerically examine the impact of the actually implemented reduction policy of the subsidy to the petroleum sector by using a static CGE model with the latest input-output table of Indonesia of year 2008. Our simulation results indicate that the Indonesian economy suffered from the actually implemented policy with a welfare loss of 28,417.78 billion rupiah even with the conversion policy. Furthermore, the proposed future reduction policy by the Ministry of Finance would unavoidably result in a welfare loss even when the government continues the current conversion policy. However, our simulation results also suggest that a new future conversion policy with a slightly additional subsidy to the LPG sector would eventuate in completely offsetting the negative effect of the proposed plan on the future welfare with an expanding government expenditure.
    Keywords: Computable General Equilibrium (CGE) Model, Petroleum, Subsidy, Welfare, Simulation
    JEL: C68 D57 D58 D60 E17 H53
    Date: 2011–12
  7. By: Hayakawa, Kazunobu; Tanaka, Kiyoyasu; Ueki, Yasushi
    Abstract: We examine transport modal decision by multinational firms to shed light on the role of freight logistics in multinational activity. Using a firm-level survey in Southeast Asia, we show that foreign ownership has a significantly positive and quantitatively large impact on the likelihood that air/sea transportation is chosen relative to truck shipping. This result is robust to the shipping distance, cross-border freight, and transport infrastructure. Both foreign-owned exporters and importers also tend to use air/sea transportation. Thus, our analysis presents a new distinction between multinational and domestic firms in their decision over transport modes.
    Keywords: International business enterprises, Industrial management, Transportation, Costs, Southeast Asia, Transport mode, Logistics, Multinational firms, Multinomial logit
    JEL: F15 F23 R41
    Date: 2011–11
  8. By: Anees, Muhammad; Sajjad, Muhammad; Ahmed, Ishfaq
    Abstract: Economics of discrimination has been the topic of interest of many in the last decade or two. Human capital theory describes wage determination as a function of labour human capital and should be determined based on marginal productivity theorem of labour economics. Islamic theology also dictates paying labour well in time and equal to their productivity not based on his colour, race, gender, nationality health status and other non-economic factors. The current study analyses the immigrants-natives wage gap to find the extent of potential discrimination against the immigrants. Using employees' level data from the Enterprise Surveys by the World Bank in 2007, standard Oaxaca-Blinder technique and Machado-Mata counterfactual decomposition is applied. Findings indicate an existence of earning's differential in favour of natives or the Malaysian citizens and immigrants have a disadvantage. On the other hand, the differential increases until the middle of income distribution and the start declining. It suggests higher-income groups have a low level of discriminatory disadvantage. Labour market productivity could be increased if this differential is reduced, which motivates the employees. --
    Keywords: Labour market discrimination,Oaxaca-Blinder decomposition,Machado-Mata decomposition,quantile regression,earnings differential,enterprise survey,World Bank,Malaysia
    JEL: J J1 J3 J7
    Date: 2011
  9. By: Annamaria Kokenyne; Chikako Baba
    Abstract: This paper estimates the effectiveness of capital controls in response to inflow surges in Brazil, Colombia, Korea, and Thailand in the 2000s. Controls are generally associated with a decrease in inflows and a lengthening of maturities, but the relationship is not statistically significant in all cases, and the effects are temporary. Controls are more successful in providing room for monetary policy than dampening currency appreciation pressures. We argue that the macroeconomic impact of capital controls depends on the extensiveness of the policy, the level of capital market development, the support provided by other policies, and the persistence of capital flows.
    Date: 2011–12–02
  10. By: John Whalley; Manmohan Agarwal; Jing Wang; Sean Walsh; Chen Yan
    Abstract: The G20 Framework for Strong, Sustainable and Balanced Growth builds on the claim that growing imbalances before the 2008 Financial Crisis were a major cause of the crisis, and the further claim that reducing imbalances post crisis must be a central part of any effort to prevent a further occurrence. Analytical literature in economics seemingly does not provide satisfactory measures of financial instability, either in individual national economies or in the combined global economy; nor ways of linking imbalance change to either worsening or improving financial (or real) instability and the onset of financial crises. Here we focus on the external sector component of financial instability and link changes in country imbalances to individual economy growth rates in ways when summed across countries produce indices of expected worsening or improving financial instability at different points in time. We compute a variety of such indices for the years immediately before the 2008 Financial Crisis. We use the sum of the absolute value of external sector imbalances across countries (the trade imbalance, or the current account imbalance) as a proportion of the combined GDP of countries and link them in various ways to country growth rates. An increasing measure under an index is an indication of future widening excess demands and supplies over all countries as a group relative to gross world product. This, in turn, is an indication of increasing severity of adjustment problems ahead, and hence expected worsening financial instability. We compute such indices for all G20 countries, and various subsets of countries (G2, G8, G8+5) and examine their behavior over the period 2004-2007. Our results suggest that depending upon the index used and the base date chosen for comparative purposes in determining changes, different implications emerge for the linkage between external sector imbalances, perceived future instability and hence the onset of a financial crisis. The implication we drawn is that the links between imbalances and both the onset and best policy response to the 2008 Financial Crisis asserted by the G20 may be more tenuous than claimed. Indeed no such links were suggested earlier for the 1930s, the Asian Financial Crisis or any other crisis. In turn economies have functioned with larger imbalances relative to GDP than in 2008 for considerable periods of time and with no financial implosion (UK in the pre World War I period; Germany and Australia in the 1990s).
    JEL: F1 F30
    Date: 2011–12
  11. By: Ambrogio Cesa-Bianchi; M. Hashem Pesaran; Alessandro Rebucci; TengTeng Xu
    Abstract: This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission of international business cycles to Latin America. Evidence based on a GVAR model for five large Latin American economies shows that the long-term impact of a China GDP shock on the typical Latin American economy has increased by three times since the mid-1990s, while the long-term impact of a US GDP shock has halved, while the transmission of shocks to Latin America and the rest of emerging Asia GDP (excluding China and India) has not changed. These changes owe more changes in China’s impact on Latin America’s traditional and largest trading partners than to increased direct bilateral trade linkages boosted by the decade-long commodity price boom. These findings have important implications for both Latin America and the international business cycle.
    JEL: C32 E32 F44 O54
    Date: 2011–09
  12. By: Roger Sandilands (Department of Economics, The University of Strathclyde)
    Abstract: This paper addresses the challenges facing China in accelerating the pace of rural-urban migration as part of its on-going economic development programme. It explains the push and pull influences on migration and in particular explains why a continuing focus on urbanisation is justified by the very large gap between rural and urban incomes and the relatively higher income elasticity of demand for urban-based goods and services. The provision of affordable housing is an integral part of this structural shift programme. The paper thus considers the most appropriate ways in which housing finance can be mobilised, and thence how both the quality and the affordability of the housing stock can be increased. Positive and negative lessons for China are offered from the different urbanisation experiences of Latin America (especially Colombia) and Singapore.
    Keywords: China, Colombia, Singapore, rural-urban migration, housing finance
    JEL: O16 O18 O57 R31 R52
    Date: 2011–11
  13. By: Swati Dhingra
    Abstract: Firms face competing needs to expand product variety and reduce production costs. Trade policy affects firm investments in product variety and production processes differently. Access to larger markets enables innovation to reduce costs. Although firm scale increases, foreign competition reduces markups. Firms react by narrowing their product varieties to recapture these lost markups. I provide a theory detailing this conflicting impact of trade policy and address welfare gains from trade. Accounting for firm heterogeneity, I show support for the theoretical predictions with firm-level innovation data from Thailand's manufacturing sector which experienced unilateral home tariff changes during 2003-2006.
    Keywords: brands, trade, manufacturing, heterogeneous firms, Thailand
    JEL: F10 F14 M37 N80
    Date: 2011–12

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