nep-sea New Economics Papers
on South East Asia
Issue of 2012‒02‒27
nine papers chosen by
Kavita Iyengar
Asian Development Bank

  1. De facto currency baskets of China and East Asian economies: The rising weights By Fang, Ying; Huang, Shicheng; Niu, Linlin
  2. Trade Costs in Asia and the Pacific: Improved and Sectoral Estimates By Yann Duval; Chorthip Utoktham
  3. Gateway cities and urbanisation in southeast asia before world war II By Gregg Huff
  4. Forecasting inflation in Asian economies By Liew, Freddy
  5. Lessons of the European Crisis for Regional Monetary and Financial Integration in East Asia By Volz, Ulrich
  6. Assessing the Resilience of ASEAN Banking Systems: The Case of the Philippines By Albert, Jose Ramon; Ng, Thiam Hee
  7. Regional and Global Monetary Cooperation By Lamberte, Mario; Morgan , Peter J.
  8. Strengthening Financial Infrastructure By Morgan, Peter J.; Lamberte , Mario
  9. Mundus academicus: arhitectura și adaptarea la fluxurile globalizării (II) By Hălăngescu, Constantin I.

  1. By: Fang, Ying (BOFIT); Huang, Shicheng (BOFIT); Niu, Linlin (BOFIT)
    Abstract: We employ Bayesian method to estimate a time-varying coefficient version of the de facto currency basket model of Frankel and Wei (2007) for the RMB of China, using daily data from February 2005 to July 2011. We estimate jointly the implicit time-varying weights of all 11 currencies in the reference basket announced by the Chinese government. We find the dollar weight has been reduced and sometimes significantly smaller than one, but there is no evidence of systematic operation of a currency basket with discernable pattern of significant weights on other currencies. During specific periods, the reduced dollar weight has not been switched to other major international currencies, but to some East Asian currencies, which is hard to explain by trade importance to or trade competition with China. We examine currency baskets of these East Asian Economies, including major international currencies and the RMB in their baskets. We find an evident tendency of Malaysia and Singapore to increase the weights of RMB in their own currency baskets, and a steadily and significantly positive weight of RMB in the basket of Thailand. These evidences suggest that, the positive weights of some East Asian currencies in RMB currency basket during specific periods largely reflect the fact that these East Asia economies have been systematically placing greater weights on RMB under the new regime of RMB exchange rate.
    Keywords: RMB currency basket; time-varying regressions; East Asia; China; US
    JEL: C11 F31 F41
    Date: 2012–02–23
  2. By: Yann Duval; Chorthip Utoktham (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: There is ample evidence that successful implementation of bilateral or regional trade and economic integration initiatives would have a very significant impact on intraregional trade in Asia and the Pacific. However, little is known about the level of intraregional trade costs in the region and to what extent these costs may have decreased over time. This paper introduces new aggregate and sectoral estimates of bilateral trade costs in Asia and the Pacific available in an updated and extended version of the ESCAP Trade Cost Database (Version 2). The new data suggests that (1) most countries and subregions have made improvements in reducing trade costs; (2) Trade costs among Asian countries still often exceed the costs of trade of Asian countries with developed countries outside the region; and (3) tariff costs accounts for only a small portion of comprehensive trade costs – although tariff cuts account for a large share of overall trade cost reduction over the past decade. At the sectoral level, agricultural trade costs are systematically found to exceed manufacturing trade costs, even when tariff costs are excluded. The fact that agricultural trade costs in many developing countries are twice as high as their trade costs in manufactured goods suggest that focusing trade facilitation efforts on that sector may be particularly productive, especially given the importance of this sector for poverty reduction and more inclusive and sustainable development.
    Keywords: trade costs, bilateral trade, Asia and the Pacific, sectoral data, trade facilitation, non-tariff measures
    JEL: F1
    Date: 2011–12
  3. By: Gregg Huff (Pembroke College, University of Oxford, Oxford OX1 1DW, UK)
    Abstract: Between the 1870s and World War II, falls in world shipping costs and Western industrialisation gave rise to export-led Southeast Asian growth and specialization in a narrow range of primary commodity exports. A linked development was the emergence of a few dominant Southeast Asian urban centres, typically primate and always ports. Drawing on historical census data, this paper uses rank-size distributions and transition matrices to investigate the influence of commodity specialisation and exports on urban systems development in the region. It is argued that different commodities produced different spread effects, resulting in variation in degrees of urban concentration in the region. However, geography, path dependence and infrastructure also shaped urban systems development. The main cities that emerged during this period became the ‘gateways’ that connected frontier Southeast Asia to the global economy.
    Keywords: urbanisation; gateway cities; agglomeration effects; export-led growth; staple exports; urban systems; rank-size distributions; transition matrices
    JEL: N15 N95 R11
    Date: 2012–02–22
  4. By: Liew, Freddy
    Abstract: This paper surveys the recent literature on inflation forecasting and conducts an extensive empirical analysis on forecasting inflation in Singapore, Japan, South Korea and Hong Kong paying particular attention to whether the inflation-markup theory can help to forecast inflation. We first review the relative performance of different predictors in forecasting h-quarter ahead inflation using single equations. These models include the autoregressive model and bivariate Philips curve models. The predictors are selected from business activity, financial activity, trade activity, labour market, interest rate market, money market, exchange rate market and global commodity market variables. We then evaluate a vector autoregressive inflation-markup model against the single equation models to understand whether there is any gain in forecasting using the inflation-markup theory. The paper subsequently analyses the robustness of these results by examining different forecasting procedures in the presence of structural breaks. Empirical results suggest that inflation in Singapore, Hong Kong and South Korea is best predicted by financial and business activity variables. For Japan, global commodity variables provide the most predictive content for inflation. In general, monetary variables tend to perform poorly. These results hold even when structural break is taken into consideration. The vector autoregressive inflation-markup model does improve on single equation models as forecasting horizon increases and these gains are found to be significant for Japan and Korea.
    Keywords: Inflation; Markup; Forecasting; Asia; Structural Break
    JEL: C32 C53 E31
    Date: 2012–01–01
  5. By: Volz, Ulrich (Asian Development Bank Institute)
    Abstract: The debt crisis in several member states of the euro area has raised doubts on the viability of European Economic and Monetary Union (EMU) and the future of the euro. While the launch of the euro in 1999 stirred a lot of interest in regional monetary integration and even monetary unification in various parts of the world, including East Asia, the current crisis has had the opposite effect, even raising expectations of a break-up of the euro area. Indeed, the crisis has highlighted the problems and tensions that will inevitably arise within a monetary union when imbalances build up and become unsustainable. This note discusses the causes of the current European crisis and the challenges that EMU countries face in solving it. Based on this analysis, it derives five lessons for regional financial and monetary cooperation and integration in East Asia.
    Keywords: european crisis; euro area; european monetary union; financial integration; east asia
    JEL: E42 F33 F36 G01
    Date: 2012–02–23
  6. By: Albert, Jose Ramon (Philippine Institute for Development Studies); Ng, Thiam Hee (Asian Development Bank)
    Abstract: Since the global financial crisis in 2008/09 there has been heightened concern about the resilience of banking systems in Southeast Asia. This paper proposes a methodology that uses a macroprudential perspective to assess the resilience of banking systems in member countries of the Association of Southeast Asian Nations. It then proceeds to apply this methodology to examine the resilience of the Philippine banking system. Data on financial soundness in the Philippine banking system are utilized in a vector autoregression model to study the dynamic relationships that exist among financial and macroeconomic indicators. Using impulse response functions, a simulation of financial ratios in the banking system is conducted by assuming unlikely but plausible stress scenarios to determine whether banking system credit and capital could withstand the impact of such circumstances. In the stress scenarios, the estimated impact of macroeconomic shocks on nonperforming loan and capital adequacy ratios is generally minimal. The results, however, do suggest that the Philippine banking system has some vulnerability to interest rate and stock market shocks. The results of such stress testing provide a better understanding of the level of preparedness required for managing risks in the financial system, especially in the wake of continuing global economic uncertainty.
    Keywords: Banking System; Macroprudential; Stress Testing; Philippines; Panel VAR
    JEL: C33 E44 G21
    Date: 2012–02–01
  7. By: Lamberte, Mario (Asian Development Bank Institute); Morgan , Peter J. (Asian Development Bank Institute)
    Abstract: The increasing occurrence of national, regional, and global financial crises, together with their rising costs and complexity, have increased calls for greater regional and global monetary cooperation. This is particularly necessary in light of volatile capital flow movements that can quickly transmit crisis developments in individual countries to other countries around the world. Global financial safety nets (GFSNs) are one important area for monetary cooperation. This paper reviews the current situation of regional and global monetary cooperation, focusing on financial safety nets, with a view toward developing recommendations for more effective cooperation, especially between the International Monetary Fund (IMF) and regional financial arrangements (RFAs).
    Keywords: monetary cooperation; regional monetary cooperation; global monetary cooperation; regional financial arrangements; financial safety nets; global financial crises
    JEL: F33 F34 F36 F53 F55
    Date: 2012–02–23
  8. By: Morgan, Peter J. (Asian Development Bank Institute); Lamberte , Mario (Asian Development Bank Institute)
    Abstract: This study provides comparative perspectives on the current and prospective situation of financial market development in ASEAN, the PRC, and India, identifies key priorities for strengthening financial infrastructure to promote financial development and regional integration, and produces policy recommendations at the national, sub-regional and regional levels. The four priority areas covered by the study are: market development, opening, and efficiency; financial inclusion; achievement of financial stability; and financial integration.
    Keywords: financial market development; financial infrastructure; financial development; regional integration; asean; prc; india
    JEL: E52 F32 G21 G22 G24 G28
    Date: 2012–02–17
  9. By: Hălăngescu, Constantin I.
    Abstract: This second part of the study, contains the presentation, in the same manner, of the wiewpoints on the last region in the acadmeic world map considered in my analysis: Europe. Of course, globalization and building a united Europe, strong growth of labour markets and capital flows, human resources and information, visible disparities of regional education systems in Europe, North America and Asia-Pacific countries, multiplying “factorial” higher education providers, increasing global competition between and/or the universities – all key elements in what I would call the domino allow between Bologna process innovations and values triumph. Bologna created and resized European values, he scaled a more or less in global manner, imposed a new way of thinking and designing the whole system of European higher education. Without doubt, the internationalization of European academic mobility system geenrated by specially designed programs, led to the development of integrated services, more and more professional. Romanian higher education can not ignore these changes, but is far from the requirements of a globally competitive higher education. For real reform, the change must be guided by a clear conception of the strategies, competence and critical, to have political support and substantial funding. Academic education and scientific research today gives the measure of value and strenght of a nation in the great European and global concert. Reform does not admit, therefore, alternative: the only solution for the better future among civilized countries is succes. And success is quality, efficiency and performance in education and research, competitiveness in Europe and worldwide.
    Keywords: mundus academicus; globalisation; internationalization; regionalization; higher education; economics; academic reforms; knowlegdebased society; brain-power industries; mobilities; Bologna process; Romanian higher education system
    JEL: I2 A20 A12 N30 H52
    Date: 2012–02

This nep-sea issue is ©2012 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.