nep-sea New Economics Papers
on South East Asia
Issue of 2012‒01‒18
seventeen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Intra-Asia Exchange Rate Volatility and Intra-Asia Trade: Evidence by Type of Goods By Tang, Hsiao Chink
  2. Influence of age of child on differences in life satisfaction of males and females: Comparative study among East Asian countries. By Yamamura, Eiji
  3. Is Trade in Asia Really Integrating? By Hamanaka, Shintaro
  4. Achieving a sustainable automotive sector in Asia and the Pacific: Challenges and opportunities for the reduction of vehicle CO2 emissions By Masato Abe
  5. Rules of origin and development of regional production network in Asia: case studies of selected industries By Biswajit Nag; Debdeep De
  6. Investment, institutions, and governance in Asia By Emmanuel S. de Dios; Geoffrey M. Ducanes
  7. Volatility Spillovers from the Chinese Stock Market to Economic Neighbours By David E. Allena; Ron Amrama; Michael McAleer
  8. Specification Sensitivity in Right-Tailed Unit Root Testing for Explosive Behavior By Peter C.B. Phillips; Shu-Ping Shi; Jun Yu
  9. The Political Economy of Reducing the United States Dollar`s Role as a Global Reserve Currency By Yap, Josef T.
  10. The unexpected global financial crisis : researching its root cause By Lin, Justin Yifu; Treichel, Volker
  11. Analysis of Export and Import Processes of Seclected Products in Thailand By Somnuk Keretho; Saisamorn Naklada
  12. Deriving consensus rankings via multicriteria decision making methodology By Amy Poh Ai Ling; Mohamad Nasir Saludin; Masao Mukaidono
  13. Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation By Yann Duval; Chorthip Utoktham
  14. Testing for Multiple Bubbles By Peter C.B. Phillips; Shu-Ping Shi; Jun Yu
  15. Bayesian Learning of Impacts of Self-Exciting Jumps in Returns and Volatility By Andras Fulop; Junye Li; Jun Yu
  16. In Search of a Strategy for Making Growth More Pro-Poor in the Philippines By Nobuhiko Fuwa; Arsenio M. Balisacan; Fabrizio Bresciani
  17. Who’s Going Green and Why? Trends and Determinants of Green Investment By Abdoul Aziz Wane; Luc Eyraud; Changchang Zhang; Benedict J. Clements

  1. By: Tang, Hsiao Chink (Asian Development Bank)
    Abstract: This paper examines the impact of intra-Asia exchange rate volatility on intra-Asia trade in primary goods, intermediate goods, equipment goods, and consumption goods from 1980 to 2009. For Asia, the evidence shows that as intraregional exchange rate volatility increases, intraregional exports in these goods fall. This adverse impact is even more pronounced in the sub-region of Association of Southeast Asian Nations (ASEAN)+5 comprising ASEAN member countries plus the People's Republic of China; Hong Kong, China; Japan; the Republic of Korea; and Taipei,China; and especially among intermediate and equipment exports. Again, the impact magnifies in an even smaller sub-group excluding the smaller ASEAN economies. These results underline the significant impact of exchange rate volatility on the region's production networks. For South Asia, however, exchange rate volatility appears to have a positive impact on exports. Still, caution is warranted given that South Asian economies trade relatively little with each other.
    Keywords: exchange rate volatility; trade; ASEAN; East Asia
    JEL: F10 F14 F31
    Date: 2011–12–01
  2. By: Yamamura, Eiji
    Abstract: Using individual-level data for China, Korea, and Japan for 2006, this research examines how the age of children influences life satisfaction for males and females in East Asian countries. Our results show that the life satisfaction of males is barely affected by a child of the relationship, whereas the life satisfaction of females with a young child is lower than that of females who do not have a child. This result holds for countries at different development stages. There is also a gender differential regarding the effect of young children on life satisfaction. Furthermore, the more developed the country, the greater this difference becomes.
    Keywords: Life satisfaction; child; East Asian countries; Ordered probit
    JEL: J13 D19 J16
    Date: 2012–01–05
  3. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: Is intraregional trade in Asia really integrating? It is not easy to answer this ostensibly simple question. There are two ways to assess the level of trade integration: de facto integration and de jure integration. With respect to de facto integration (actual level of interdependence in terms of trade flows), the answer depends on which Asian countries are being considered and which indicator is being using to measure trade interdependence. This paper compares the trade interdependence of different sets of Asian countries using various indices. With respect to de jure integration (the signing of free trade agreements [FTAs]), the number of signed FTAs in Asia is growing but the relation between trade interdependence and the signing of FTAs has not been sufficiently studied. The second half of this paper addresses whether de jure trade integration is ultimately brought about by high-level or low-level de facto trade integration.
    Keywords: FTAs; trade interdependence; scope of agreements
    JEL: F15 F53 F55 F59
    Date: 2012–01–01
  4. By: Masato Abe (Economic and Social Commission for Asia and the Pacific)
    Abstract: This working paper analyses the contribution of the Asia-Pacific automotive sector to greenhouse gas (GHG) emissions, and the challenges and opportunities facing the sector in efforts to reduce those emissions, primarily carbon dioxide (CO2). The main purpose of this paper is to identify recommendations for appropriate policies and strategies as well as for regional cooperation, to ensure that future developments in the automotive sector contribute to mitigating and adapting to climate change.
    Keywords: climate change, vehicle carbon emission, automotive sector development, economic development
    JEL: F1
    Date: 2011–12
  5. By: Biswajit Nag; Debdeep De (Indian Institute of Foreign Trade)
    Abstract: Rules of Origin (RoO) are essential part of trade rules that become very important in the context of increasing globalisation of production process. Most industrial goods today incorporate inputs from a wide variety of countries (e.g. automobiles, electronic goods etc) and when traded it becomes important to determine their country of origin as tariffs depend on country of origin. The current study performs a critical investigation of RoO in selected regional trade agreements (RTAs) in the Asia Pacific region, and has made attempts to study linkages with intra-regional trade in some sectors such as textiles, electronics in the form of integrated circuits, and automobile components.
    Keywords: Rules of origin, international production network, free trade agreement, preferential trade agreement
    JEL: F1
    Date: 2011–05
  6. By: Emmanuel S. de Dios (School of Economics, University of the Philippines Diliman); Geoffrey M. Ducanes (School of Economics, University of the Philippines Diliman)
    Abstract: We investigate the extent to which the investment slowdown in many Asian countries since the Asian Financial Crisis is attributable to changes in governance institutions. In the process we test the more general hypothesis that different aspects of governance will become relevant constraints to investment and growth at differing levels of countries' development. This hypothesis is validated and explains a standing paradox that finds certain governance aspects--notably voice and accountability and control of corruption--do not apparently figure as explanations in the average growth record. We show that in fact they do, though only at certain levels of development.
    Date: 2011–09
  7. By: David E. Allena; Ron Amrama; Michael McAleer (University of Canterbury)
    Abstract: This paper examines whether there is evidence of spillovers of volatility from the Chinese stock market to its neighbours and trading partners, including Australia, Hong Kong, Singapore, Japan and USA. China’s increasing integration into the global market may have important consequences for investors in related markets. In order to capture these potential effects, we explore these issues using an Autoregressive Moving Average (ARMA) return equation. A univariate GARCH model is then adopted to test for the persistence of volatility in stock market returns, as represented by stock market indices. Finally, univariate GARCH, multivariate VARMA-GARCH, and multivariate VARMA-AGARCH models are used to test for constant conditional correlations and volatility spillover effects across these markets. Each model is used to calculate the conditional volatility between both the Shenzhen and Shanghai Chinese markets and several other markets around the Pacific Basin Area, including Australia, Hong Kong, Japan, Taiwan and Singapore, during four distinct periods, beginning 27 August 1991 and ending 17 November 2010. The empirical results show some evidence of volatility spillovers across these markets in the pre-GFC periods, but there is little evidence of spillover effects from China to related markets during the GFC. This is presumably because the GFC was initially a US phenomenon, before spreading to developed markets around the globe, so that it was not a Chinese phenomenon.
    Keywords: Volatility spillovers;VARMA-GARCH; VARMA-AGARCH; Chinese stock market
    Date: 2011–12–01
  8. By: Peter C.B. Phillips (Cowles Foundation, Yale University); Shu-Ping Shi (Australian National University); Jun Yu (Singapore Management University)
    Abstract: Right-tailed unit root tests have proved promising for detecting exuberance in economic and financial activities. Like left-tailed tests, the limit theory and test performance are sensitive to the null hypothesis and the model specification used in parameter estimation. This paper aims to provide some empirical guidelines for the practical implementation of right-tailed unit root tests, focussing on the sup ADF test of Phillips, Wu and Yu (2011), which implements a right-tailed ADF test repeatedly on a sequence of forward sample recursions. We analyze and compare the limit theory of the sup ADF test under different hypotheses and model specifications. The size and power properties of the test under various scenarios are examined in simulations and some recommendations for empirical practice are given. Empirical applications to the Nasdaq and to Australian and New Zealand housing data illustrate these specification issues and reveal their practical importance in testing.
    Keywords: Unit root test, Mildly explosive process, Recursive regression, Size and power
    JEL: C15 C22
    Date: 2012–01
  9. By: Yap, Josef T.
    Abstract: Many have argued that the major source of the existing global macroeconomic imbalances are the twin deficits of the United States (US). However, there is still a debate about whether the global imbalances indeed pose a significant threat to the world economy. This matter is settled by arguing that the global imbalances acted as a `handmaiden` to the 2008 financial crisis. One way to reduce global imbalances is to reform the international monetary system and reduce the role of the US dollar as a reserve currency. Robert Triffin was one of those critical of this “exorbitant†privilege granted to the US, which makes it both a system maker and privilege taker. The Triffin Dilemma captures the fundamental instability that underlies the dollar reserve system. However, there are major obstacles to this proposal. Some analysts including Triffin cited the US security umbrella as the primary reason the US and its major allies would want to retain the role of the dollar in global trade and finance despite the underlying inequities in the system. This is related to the imbalance in global governance which is largely US-centric. The imbalance in global governance is also reflected in the dominance of the US financial system brought about by the “first-mover advantage.†Because of the inertia brought about by the imbalance in global governance, economic arguments to reform the international monetary system are likely to be trumped by political reality. The paper analyzes whether current efforts in East Asia in terms of financial and monetary cooperation and rebalancing of economic growth could significantly mitigate the adverse impacts of a global system that will still be dominated by the US dollar in the foreseeable future. It also explains why the People`s Republic of China (PRC) is unlikely to make significant unilateral adjustments to reduce global macroeconomic imbalances.
    Keywords: reserve currency, fiduciary system, global imbalances, Triffin Dilemma
    Date: 2011
  10. By: Lin, Justin Yifu; Treichel, Volker
    Abstract: The world is currently still struggling with the aftermath of the worst economic crisis since the Great Depression. Following a description of the eruption, evolution and consequences of the global crisis, this paper reviews alternative hypotheses for the causes of the global financial crisis as well as their empirical evidence. The paper refutes the frequently voiced view that the global crisis was caused by global imbalances that reflected economic policies of East Asian countries. Instead, it argues that global imbalances were the result of excess demand in the United States, resulting from both the public debt in the United States arising from the Afghanistan and Iraqi wars and tax cuts and the overconsumption by households supported by the wealth effect from the housing bubble in the United States. The housing bubble itself was the outcome of the Federal Reserve's low interest rate policy in the aftermath of the burst of the"dot-com"bubble in 2001, the lack of appropriate financial regulation, and housing policies aimed at expanding the mortgage market to low-income borrowers. It was possible to maintain the large trade deficits of the United States for such a long period of time because of the dollar's reserve currency status. When the housing bubble in the United States burst, the global crisis ensued. The paper also analyzes why China's trade surplus increased significantly in general and with the United States in particular in recent years, and argues that this increase was caused by both the relocation of the labor-intensive tradable sector of East Asian economies to China and high corporate saving rates in China as a result of its dual-track approach to reform.
    Keywords: Debt Markets,Currencies and Exchange Rates,Emerging Markets,Economic Theory&Research,Access to Finance
    Date: 2012–01–01
  11. By: Somnuk Keretho; Saisamorn Naklada (Institute for Information Technology Innovation (INOVA), Kasetsart University.)
    Abstract: Administrative and procedural barriers to import and export processes may unnecessarily impede further participation in international trade. Business Process Analysis (BPA) is a powerful tool which can help to identify these barriers and suggest ways to streamline trade processes. As part of the ARTNeT Regional Study on Improving Regional Trade Procedures and Processes, a BPA was conducted on Thai exports of sugar to Bangladesh and auto-parts to India as well as imports of raw materials used to produce electronic goods.
    Keywords: Business process Analysis, Trade Facilitation, Thailand, single window, paperless, international supply chain
    JEL: F1
    Date: 2011–06
  12. By: Amy Poh Ai Ling; Mohamad Nasir Saludin; Masao Mukaidono
    Abstract: Purpose - This paper seeks to take a cautionary stance to the impact of the marketing mix on customer satisfaction, via a case study deriving consensus rankings for benchmarking on selected retail stores in Malaysia. Design/methodology/approach - The ELECTRE I model is used in deriving consensus rankings via multicriteria decision making method for benchmarking base on the marketing mix model 4P's. Descriptive analysis is used to analyze best practice among the four marketing tactics. Findings - Outranking methods in consequence constitute a strong base on which to found the entire structure of the behavioral theory of benchmarking applied to development of marketing strategy. Research limitations/implications - This study looks only at a limited part of the puzzle of how consumer satisfaction translates into behavioral outcomes. Practical implications - The study provides managers with guidance on how to generate a rough outline of potential marketing activities that can be used to take advantage of capabilities and convert weaknesses and threats. Originality/value - The paper interestingly portrays the effective usage of multicriteria decision-making and ranking method to help marketing managers predict their marketing trends.
    Date: 2012–01
  13. By: Yann Duval; Chorthip Utoktham (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: This paper explores the trade facilitation performance of India and Mekong countries using a new measure of bilateral comprehensive trade costs, complemented by a review of specific trade policy and trade facilitation-related indicators. A model of comprehensive trade costs is then developed and estimated using these specific indicators in an effort to identify policies and measures that have a significant effect on trade costs, and to prioritize them. The trade costs between India and Mekong countries are found to be high: from 20% to 100% higher than those prevailing among Mekong countries. However, the fact that India, China, Thailand, and most of the other India-Mekong countries made more progress in reducing trade costs with each other than with developed countries - such as Japan and the USA - is encouraging, showing signs of slow but steady improvements in regional connectivity. Econometric results suggest that countries should prioritize policies aimed at further developing maritime and ICT services to reduce trade costs.
    Keywords: trade costs, trade facilitation, measures, policy, India, Mekong, tariff, non-tariff, regional connectivity, maritime, ICT, Information and Communication Technology
    JEL: F1
    Date: 2011–09
  14. By: Peter C.B. Phillips (Cowles Foundation, Yale University); Shu-Ping Shi (Australian National University); Jun Yu (Singapore Management University)
    Abstract: Identifying and dating explosive bubbles when there is periodically collapsing behavior over time has been a major concern in the economics literature and is of great importance for practitioners. The complexity of the nonlinear structure inherent in multiple bubble phenomena within the same sample period makes econometric analysis particularly difficult. The present paper develops new recursive procedures for practical implementation and surveillance strategies that may be employed by central banks and fiscal regulators. We show how the testing procedure and dating algorithm of Phillips, Wu and Yu (2011, PWY) are affected by multiple bubbles and may fail to be consistent. The present paper proposes a generalized version of the sup ADF test of PWY to address this difficulty, derives its asymptotic distribution, introduces a new date-stamping strategy for the origination and termination of multiple bubbles, and proves consistency of this dating procedure. Simulations show that the test significantly improves discriminatory power and leads to distinct power gains when multiple bubbles occur. Empirical applications are conducted to S&P 500 stock market data over a long historical period from January 1871 to December 2010. The new approach identifies many key historical episodes of exuberance and collapse over this period, whereas the strategy of PWY and the CUSUM procedure locate far fewer episodes in the same sample range.
    Keywords: Date-stamping strategy, Generalized sup ADF test, Multiple bubbles, Rational bubble, Periodically collapsing bubbles, Sup ADF test
    JEL: C15 C22
    Date: 2012–01
  15. By: Andras Fulop (Finance Department, ESSEC Business School, Paris-Singapore, Cergy-Pontoise Cedex, France 95021); Junye Li (Finance Department, ESSEC Business School, Paris-Singapore, 100 Victoria Street, Singapore 188064); Jun Yu (Sim Kee Boon Institute for Financial Economics, School of Economics, and Lee Kong Chian School of Business, Singapore Management University, 90 Stamford Road, Singapore 178903)
    Abstract: The paper proposes a new class of continuous-time asset pricing models where negative jumps play a crucial role. Whenever there is a negative jump in asset returns, it is simultaneously passed on to diffusion variance and the jump intensity, generating self-exciting co-jumps of prices and volatility and jump clustering. To properly deal with parameter uncertainty and in-sample over-fitting, a Bayesian learning approach combined with an efficient particle filter is employed. It not only allows for comparison of both nested and non-nested models, but also generates all quantities necessary for sequential model analysis. Empirical investigation using S&P 500 index returns shows that volatility jumps at the same time as negative jumps in asset returns mainly through jumps in diffusion volatility. We find substantial evidence for jump clustering, in particular, after the recent financial crisis in 2008, even though parameters driving dynamics of the jump intensity remain difficult to identify.
    Keywords: Self-Excitation, Volatility Jump, Jump Clustering, Extreme Events, Parameter Learning, Particle Filters, Sequential Bayes Factor, Risk Management
    JEL: C11 C13 C32 G12
    Date: 2012–01
  16. By: Nobuhiko Fuwa (Waseda University); Arsenio M. Balisacan (School of Economics, University of the Philippines Diliman); Fabrizio Bresciani (World Bank)
    Abstract: The main driver of poverty reduction has shifted from agricultural to non-agricultural income growth in rural Philippines in the past two decades. Agricultural growth is still relatively more important (vis-a-vis non-agricultural growth), however, in reducing rural poverty in relatively more isolated provinces. Our results suggest that agricultural investments should focus on areas with underdeveloped infrastructure but with comparative advantage in agriculture. At the same time, non-agricultural income growth can be made more pro-poor by investing in mobility infrastructure and health, facilitating international labor migration, and lowering income inequality.
    Keywords: poverty, growth and inequality, pro-poor growth, role of agriculture, the Philippines, Asia
    JEL: I32 O15 O40
    Date: 2011–11
  17. By: Abdoul Aziz Wane; Luc Eyraud; Changchang Zhang; Benedict J. Clements
    Abstract: This paper fills a gap in the macroeconomic literature on renewable sources of energy. It offers a definition of green investment and analyzes the trends and determinants of this investment over the last decade for 35 advanced and emerging countries. We use a new multi-country historical dataset and find that green investment has become a key driver of the energy sector and that its rapid growth is now mostly driven by China. Our econometric results suggest that green investment is boosted by economic growth, a sound financial system conducive to low interest rates, and high fuel prices. We also find that some policy interventions, such as the introduction of carbon pricing schemes, or “feed-in-tariffs,†which require use of “green†energy, have a positive and significant impact on green investment. Other interventions, such as biofuel support, do not appear to be associated with higher green investment.
    Keywords: Asia , China , Climatic changes , Cross country analysis , Economic models , Energy policy , Energy prices , Europe , Greenhouse gas emissions , North America , Public investment , United States ,
    Date: 2011–12–16

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