nep-sea New Economics Papers
on South East Asia
Issue of 2013‒10‒05
eleven papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Financial Role of East Asian Economies in Global Imbalances: An Econometric Assessment of Developments after the Global Financial Crisis By Lee, Hyun-Hoon; Park, Donghyun
  2. Educational Expansion and Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data By Takahiro Akita; Heryanah
  3. Disclosure of Beneficial Ownership and Control in Indonesia: Legislative and Regulatory Policy Options for Sustainable Capital Markets By Fianna Jurdant
  4. The Roles of Location and Education in the Distribution of Economic Well-being in Indonesia: Hierarchical and Non-hierarchical Inequality Decomposition Analyses By Takahiro Akita; Sachiko Miyata
  5. Monetary Policy Frameworks in Asia: Experience, Lessons, and Issues By Morgan, Peter J.
  6. Chronic and Transient Poverty in Indonesia: A Spatial Perspective with the 2008-2010 Susenas Panel Data By Takahiro Akita; Ni Made Inna Dariwardani
  7. Urbanization and Expenditure Inequality in Indonesia: Testing the Kuznets Hypothesis with Provincial Panel Data By Perdamen Sagala; Takahiro Akita; Arief Anshory Yusuf
  8. Making Emerging Asia-Pacific Less Vulnerable to Global Financial Panics By Vatcharin Sirimaneetham
  9. The Effect of Myanmar’s Foreign Investment Policies on FDI Inflows: An Analysis of Panel Data across ASEAN Member Countries By Miguel Ramirez; Blake Tretter
  10. Testing for Multiple Bubbles 2: Limit Theory of Real Time Detectors By Peter C. B. Phillips; Shu-Ping Shi; Jun Yu
  11. Testing for Multiple Bubbles 1: Historical Episodes of Exuberance and Collapse in the S&P 500 By Peter C. B. Phillips; Shu-Ping Shi; Jun Yu

  1. By: Lee, Hyun-Hoon (Kangwon National University); Park, Donghyun (Asian Development Bank)
    Abstract: The central objective of this paper is to empirically assess how global imbalances have evolved since the global financial crisis of 2008/09. More specifically, we examine how the security investment positions of major East Asian economies in United States (US) financial markets—equities, bonds, and bank lending—changed after the crisis. Our econometric analysis, which is based on the gravity model to identify the determinants of foreign portfolio investment in the US, finds that the "overinvestment" of most East Asian economies in the US has remained substantial after the global financial crisis, especially in long-term bonds. That is, even after the crisis, most East Asian economies continue to hold excessive amounts of US securities, but the degree of overinvestment appears to have declined for some economies such as the PRC. However, the PRC still has the largest excessive holdings of US securities. We also find that East Asian economies over-invest in US financial markets largely due to excessive savings and foreign exchange reserves.
    Keywords: Global financial crisis; global imbalances; US; East Asia; portfolio investment
    JEL: F21 F32 F34 F42
    Date: 2013–08–01
  2. By: Takahiro Akita (International University of University); Heryanah (Central Bureau of Statistics Indonesia)
    Abstract: This study analyzes the relationship between the level of educational attainment, educational inequality and expenditure inequality in Indonesia based on a provincial panel data set from 1996-2011 and attempts to test the Kuznets hypothesis for educational expansion. We found that educational inequality decreases as the average level of educational attainment increases. In contrast, expenditure inequality follows an inverted U-shaped pattern with respect to educational expansion and reaches the maximum at around 9-10 years of education. Given the current average educational level, further educational expansion would increase expenditure inequality. However, more equal distribution of education has an equalizing effect.
    Keywords: educational expansion, expenditure inequality, educational inequality, Kuznets hypothesis, panel data regression, Indonesia
    JEL: I24 I25 O15
    Date: 2013–09
  3. By: Fianna Jurdant
    Abstract: A good corporate governance framework should combine transparency, accountability and integrity and this requires knowledge of beneficial ownership. The protection of minority investors and other stakeholder protection will be challenging without access to reliable information about the ownership, including the identity of the controlling owners, and control structures of listed companies. This report assesses the costs, benefits and practicalities of different approaches, suggesting policy options to better identify ultimate beneficial ownership in Indonesia. This report was requested by the Capital Market and Financial Institution Supervisory Agency in Indonesia, Bapepam-LK, in the context of the OECD-Indonesia corporate governance policy dialogue launched in 2011. The objective is to support policy makers and regulators in their efforts to enhance disclosure and enforcement of beneficial ownership and control as part of overall efforts to improve corporate governance standards and practices in Indonesia.
    Keywords: shareholders, corporate governance, control-enhancing mechanisms, disclosure, money laundering, private enforcement, beneficial ownership, inside blockholders, public enforcement, outside blockholders
    JEL: G30 G32 K22 K42
    Date: 2013–07–11
  4. By: Takahiro Akita (International University of University); Sachiko Miyata (Rikkyo University)
    Abstract: This paper analyzes the roles of location (rural and urban sectors) and education in the distribution of economic well-being in Indonesia by employing the hierarchical and non-hierarchical decomposition methods of the Theil indices. This is done by using household expenditure data from the national socio-economic survey (Susenas) in 2008. It shows that there are large expenditure disparities across education levels but that these are more pronounced in the urban sector than the rural sector. When there are differences in educational structure between the rural and urban sectors, the hierarchical decomposition method appears to offer a better approach than the non-hierarchical method.
    Keywords: Inequality; Hierarchical and non-hierarchical decompositions; Theil indices; Urban and rural locations; Education; Indonesia
    JEL: O15 O18 R12
    Date: 2013–09
  5. By: Morgan, Peter J. (Asian Development Bank Institute)
    Abstract: This paper reviews the history of East Asian monetary policy frameworks since 1990; describes current monetary policy frameworks, including issue of price versus financial stability for a central bank and the policies a central bank can use to manage financial stability; the monetary policy transmission mechanism based on financial linkages and financial deepening; assesses policy outcomes including inflation targeting and responses to the “Impossible Trinity”; and makes overall conclusions. The paper finds that East Asian central banks have managed inflation and growth well over the past decade, but the difficulties faced by central banks of advanced countries in the aftermath of the GFC suggests that not all problems have been solved.
    Keywords: monetary policy; macroprudential policy; inflation targeting; financial stability; currency regime; capital flows; emerging economies
    JEL: E52 E58 F31 F32 G18
    Date: 2013–09–27
  6. By: Takahiro Akita (International University of University); Ni Made Inna Dariwardani (Central Bureau of Statistics Bali, Indonesia)
    Abstract: This study analyzes poverty dynamics by region for urban and rural areas based on the 2008-2010 panel Susenas. It also conducts a probit analysis to explore the determinants of poverty based on the 2008 consumption module Susenas. We found that while 11% of rural people and 7% of urban people are chronically poor, there are a large number of transiently poor people in Indonesia. These transiently poor people have a high risk of falling into poverty occasionally. There is also a large difference in the extent of chronic and transient poverty among regions. While the government should implement policies to alleviate chronic poverty, it should at the same time introduce policies that could keep transiently poor people above the poverty line. Since there is a large regional variation in the extent of poverty, spatially differentiated poverty alleviation programs should be introduced according to the extent and nature of poverty.
    Keywords: chronic and transient poverty, poverty dynamics, spatial perspective, panel data, Indonesia
    JEL: I30 O10
    Date: 2013–09
  7. By: Perdamen Sagala (Graduate School of International Relations International University of Japan); Takahiro Akita (Graduate School of International Relations International University of Japan); Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: Focusing on Indonesia, this study analyzes the relationship between inequality and the process of urbanization. Itperforms a panel data regression analysis to test the Kuznets inverted-U hypothesis for urbanization based on a provincial panel data set of 33 provinces over the period 2000-2009, constructed by using the core National Socio-economic Survey (core Susenas). Our results support the Kuznets inverted-U hypothesis, whether the Gini coefficient or the Theil indices are used as a measure of inequality. According to our estimates, expenditure inequality would reach the peak at an urbanization rate of around 46-50%. Since the 2010 urbanization rate is 50%, this indicates that expenditure inequality has already attained the peak value. Thus, further urbanization would decrease expenditure inequality, but all other things being equal.
    Keywords: urbanization; expenditure inequality; Kuznets hypothesis; panel data regression; Indonesia
    JEL: O18 R11
    Date: 2013–10
  8. By: Vatcharin Sirimaneetham (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)
  9. By: Miguel Ramirez (Department of Economics, Trinity College); Blake Tretter (Department of Economics, Trinity College)
    Abstract: Once one of the richest countries in Southeast Asia, Myanmar suffered the effects of a closed economy for over 50 years and became one of the poorest and most corrupt countries in the world. Though excited international investors wait to exploit Myanmar’s large labor force and natural resources as it reopens its markets, the country is currently far behind its potential. In such a small economy, large FDI inflows could have a significant impact on the country’s path going forward. Whether or not it receives these inflows depends on how multinational enterprises view Myanmar’s investment environment. In particular, its recently enacted foreign investment law as well as the status of sanctions on the country. By looking at a cross-section of ASEAN-member countries for the period 1995-2011, this paper analyzes the effect of foreign investment policies on FDI flows using a panel fixed-effects regression.
    Keywords: Foreign Direct Investment (FDI), Fixed Effects Model (FEM), Foreign Investment Law (FIL), Hausman Test, Index of Economic Freedom, OLI Framework, Random Effects Model (REM), and Multinational Enterprises (MNEs)
    JEL: O11 O52 C23 F21
    Date: 2013–10
  10. By: Peter C. B. Phillips (Yale University); Shu-Ping Shi (The Australian National University); Jun Yu (Sim Kee Boon Institute for Financial Economics, Singapore Management University)
    Abstract: This paper provides the limit theory of real time dating algorithms for bubble detection that were suggested in Phillips, Wu and Yu (2011, PWY) and Phillips, Shi and Yu (2013b, PSY). Bubbles are modeled using mildly explosive bubble episodes that are embedded within longer periods where the data evolves as a stochastic trend, thereby capturing normal market behavior as well as exuberance and collapse. Both the PWY and PSY estimates rely on recursive right tailed unit root tests (each with a di§erent recursive algorithm) that may be used in real time to locate the origination and collapse dates of bubbles. Under certain explicit conditions, the moving window detector of PSY is shown to be a consistent dating algorithm even in the presence of multiple bubbles. The other algorithms are consistent detectors for bubbles early in the sample and, under stronger conditions, for subsequent bubbles in some cases. These asymptotic results and accompanying simulations guide the practical implementation of the procedures. They indicate that the PSY moving window detector is more reliable than the PWY strategy, sequential application of the PWY procedure and the CUSUM procedure.
    Keywords: Bubble duration, Consistency, Dating algorithm, Limit theory, Multiple bubbles, Real time detector.
    JEL: C15 C22
    Date: 2013–07
  11. By: Peter C. B. Phillips (Yale University); Shu-Ping Shi (The Australian National University); Jun Yu (Sim Kee Boon Institute for Financial Economics, Singapore Management University)
    Abstract: Recent work on econometric detection mechanisms has shown the e¤ectiveness of recur- sive procedures in identifying and dating ?nancial bubbles. These procedures are useful as warning alerts in surveillance strategies conducted by central banks and ?scal regulators with real time data. Use of these methods over long historical periods presents a more serious econometric challenge due to the complexity of the nonlinear structure and break mecha- nisms that are inherent in multiple bubble phenomena within the same sample period. To meet this challenge the present paper develops a new recursive ?exible window method that is better suited for practical implementation with long historical time series. The method is a generalized version of the sup ADF test of Phillips, Wu and Yu (2011, PWY) and de- livers a consistent date-stamping strategy for the origination and termination of multiple bubbles. Simulations show that the test signi?cantly improves discriminatory power and leads to distinct power gains when multiple bubbles occur. An empirical application of the methodology is conducted on S&P 500 stock market data over a long historical period from January 1871 to December 2010. The new approach successfully identi?es the well-known historical episodes of exuberance and collapse over this period, whereas the strategy of PWY and a related CUSUM dating procedure locate far fewer episodes in the same sample range.
    Keywords: Date-stamping strategy, Flexible window, Generalized sup ADF test, Multiple bubbles, Rational bubble, Periodically collapsing bubbles; Sup ADF test,
    JEL: C15 C22
    Date: 2013–07

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