nep-sea New Economics Papers
on South East Asia
Issue of 2013‒11‒29
28 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Big Split: Why Did Output Trajectories in the ASEAN-4 Diverge after the Global Financial Crisis? By Agnes Isnawangsih; Vladimir Klyuev; Longmei Zhang
  2. Asian Defense Spending Trends By BERTEAU, David; HOFBAUER, Joachim
  3. Global Production Sharing, Trade Patterns and Industrialization in Southeast Asia By Prema-chandra Athukorala; Archanun Kohpaiboon
  4. Foreign Direct Investments in Southeast Asia By Sjöholm, Fredrik
  5. Singapore: Selected Issues By International Monetary Fund. Asia and Pacific Dept
  6. How Did the Global Financial Crisis Misalign East Asian Currencies? By OGAWA Eiji; Zhiqian WANG
  7. Indonesia : Urban Poverty and Program Review By World Bank
  8. Global and regional financial safety nets: lessons from Europe and Asia By Changyong Rhee; Lea Sumulong; Shahin Vallée
  9. Financial Crisis as a Catalyst of Legal Reforms: The Case of Asia By Kawai, Masahiro; Schmiegelow, Henrik
  10. Regional Economic Links in Latin America: lessons from Asia and challenges from the regional links of other BRICS By Renato Baumann
  11. Asian globalisations: market integration, trade and economic growth, 1800-1938 By Chilosi, David; Federico, Giovanni
  12. Getting incentives right: an impact evaluation of district hospital capitation payment in Vietnam By Nguyen, Ha Thi Hong; Bales, Sarah; Wagstaff, Adam; Dao, Huyen
  13. Can China’s Political System Sustain Its Peaceful Rise? By SHIRK, Susan L.
  14. Recursive formula for arithmetic Asian option prices By Kyungsub Lee
  15. Accounting for the great divergence By Broadberry, Stephen
  16. Cellular-Automata and Innovation within Indonesian Traditional Weaving Crafts By Situngkir, Hokky
  17. Thailand: 2013 Article IV Consultation By International Monetary Fund. Asia and Pacific Dept
  18. China's Political Uses of Seapower By YOSHIHARA, Toshi
  19. Coins as gauge for growth: VOC- doits to probe Java’s deep monetisation, 1700-1800 By Alberto Feenstra
  20. Employing skilled expatriates : benchmarking skilled immigration regimes across economies By De Smet, Dieter
  21. Japan in Asia's Space Race: Directions and Implications By PEKKANEN, Saadia M.
  22. Singapore: Report on the Observance of Standards and Codes By International Monetary Fund. Monetary and Capital Markets Department
  23. Sovereign Default and State-Contingent Debt By Martin Brooke; Rhys R. Mendes; Alex Pienkowski; Eric Santor
  24. The Role of Establishment Heterogeneity in the Recovery from Sudden Stops By Horag Choi
  25. Singapore: Staff Report for the 2013 Article IV Consultation By International Monetary Fund. Asia and Pacific Dept
  26. Limit Theory for an Explosive Autoregressive Process By Xiaohu Wang; Jun Yu
  27. Accessing Future Flashpoints in the South China Sea By KAPLAN, Brad
  28. Singapore: Financial System Stability Assessment By International Monetary Fund. Monetary and Capital Markets Department

  1. By: Agnes Isnawangsih; Vladimir Klyuev; Longmei Zhang
    Abstract: The global financial crisis originated in advanced economies, but had a major impact on emerging markets. The impact, however, was not uniform. Even in a relatively homogenous group of countries such as ASEAN-4 (Indonesia, Malaysia, the Philippines and Thailand), there were considerable differences both in terms of instantaneous impact of the crisis and in terms of output performance relative to trend. There are several main reasons for the divergence. First, trade shocks had a larger impact on more open economies (Malaysia and Thailand). Second, countercyclical fiscal stimulus in Indonesia and the Philippines was larger and was sustained longer. Third, idiosyncratic factors pushed output up in Indonesia and down in Thailand. Such factors include investment-friendly structural reforms and fortuitously timed election spending in Indonesia, as well as political instability and natural disasters in Thailand.
    Keywords: Economic growth;Indonesia;Malaysia;Philippines;Thailand;Association of Southeast Asian Nations;Production growth;External shocks;Global Financial Crisis 2008-2009;Cross country analysis;Global Financial Crisis; ASEAN; Countercyclical Policies.
    Date: 2013–10–30
  2. By: BERTEAU, David; HOFBAUER, Joachim
    Abstract: This brief summarizes key trends and findings of two recent reports by the Center for Strategic and International Studies (CSIS). Despite the global financial crisis that began in 2008, research by CSIS has shown that many Asian countries experienced relatively low fiscal distress and continued to increase their level of involvement in global affairs during the crisis. Today, several Asian countries are already among the largest defense spenders in the world. In addition, unlike defense budgets in many other regions, including the West, Asian defense spending continues to increase.
    Keywords: Social and Behavioral Sciences, Asia, defense, security studies, political economy
    Date: 2013–04–01
  3. By: Prema-chandra Athukorala; Archanun Kohpaiboon
    Abstract: This paper examines the emerging trends and patterns of merchandise trade in Southeast Asia and their implications for growth and structural changes in domestic manufacturing, with emphasis on the on-going process of global production sharing. The analysis reveals that participation in global production networks (GPNs) has strengthened economic interdependence among the Southeast Asian countries, and between these countries and China and the other major economies in East Asia, but this has not lessoned the dependence of growth dynamism of these countries on the global economy. The operation of the regional cross-border production networks depends inexorably on trade in final goods with North America and the European Union. Reflecting differences in policy regimes and the overall business climate, the degree of integration within GPNs and the resultant impact on industrial upgrading varies notably among the countries in the region.
    Keywords: global production sharing, global production networks, Southeast Asia, industrialization
    JEL: F14 L60
    Date: 2013
  4. By: Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN))
    Abstract: Foreign direct investment has been of great importance in economic growth and global economic integration over the last decades. South East Asia has been part of this development with rapidly increasing inflows of FDI. However, there are large variations over time and between countries in the region as regard to the policies towards FDI, and in actual inflows of FDI. This chapter aims at examining the size of FDI in South East Asia and the trends in it. The main determinants of FDI in Southeast Asia as well as their effect on the host countries are also discussed and examined.
    Keywords: Foreign direct investment; Multinational firms; Southeast Asia; Economic development
    JEL: F21 F23 O53
    Date: 2013–11–14
  5. By: International Monetary Fund. Asia and Pacific Dept
    Keywords: Labor markets;Labor productivity;Education;Monetary policy;Real effective exchange rates;Selected issues;Singapore;
    Date: 2013–11–14
  6. By: OGAWA Eiji; Zhiqian WANG
    Abstract: The global financial crisis affected the exchange rates of the U.S. dollar, the euro, and the Japanese yen, as well as some East Asian currencies. This paper investigates how the East Asian currencies were affected by the global financial crisis. We employ methodologies involving β-convergence and σ-convergence to examine the misalignments or divergence of East Asian currencies. Our empirical results show that East Asian currencies did diverge during most of the sample periods, especially after late 2005, and active international capital flows such as yen carry trades also affected their movements. We conclude that it is necessary to establish a surveillance system within the East Asian area for the purposes of early detection and prevention of intra-regional exchange rate misalignments.
    Date: 2013–11
  7. By: World Bank
    Keywords: Health Monitoring and Evaluation Urban Development - Urban Poverty Poverty Reduction - Rural Poverty Reduction Urban Development - City Development Strategies Macroeconomics and Economic Growth - Regional Economic Development Health, Nutrition and Population
    Date: 2013–01
  8. By: Changyong Rhee; Lea Sumulong; Shahin Vallée
    Abstract: The Asian financial crisis (1997) and the European crisis (2009) have both contributed to the development and deepening of regional safety net arrangements. This paper analyses the relationships between global and regional financial safety nets, and uncovers the potential tensions and operational challenges associated with the involvement of several institutional players with potentially different interests, analytical biases and governance. The G20 has acknowledged the importance of these new players for the international monetary system, but the principles for cooperation between the IMF and regional financing arrangements are far too broad and ad hocto contribute to a coherent and effective architecture. This paper tries to establish some lessons learned from the Asian financial crisis in 1997 and the current European crisis in order to enhance the effectiveness, efficiency, equity and governance of these arrangements. In particular, it proposes changes to the IMF articles of agreement to allow for lending or guarantees to regional arrangements directly and it establishes some key desirable features and practices of regional mechanisms that should be adopted everywhere to ensure some global consistency, particularly in the field of macroeconomic surveillance, programme design and conditionality.
    Date: 2013–11
  9. By: Kawai, Masahiro (Asian Development Bank Institute); Schmiegelow, Henrik (Asian Development Bank Institute)
    Abstract: This paper discusses how financial crises in emerging Asia and Japan worked as catalysts for legal reforms. Findings show that six Asian countries pursued significant legal and judicial reforms following financial crises in 1997–1998, but indicators that measure the quality of legal institutions exhibit mixed results. Reforms of economic laws alone cannot improve the quality of entire legal and judicial systems of countries. What matters is the enforcement of substantive law by procedural law, the efficiency of the justice system, and other political and social factors. Long time lags may be needed to observe how de jure changes to substantive laws lead to de facto improvements of legal institutions.
    Keywords: financial crises; legal reforms; judicial systems; legal institutions
    JEL: G01 G28 G33 K40 O16 O43
    Date: 2013–11–25
  10. By: Renato Baumann
    Abstract: Since the early 1950s Latin American countries have made systematic efforts to foster regional transactions. Nevertheless, the indicators of relative importance of regional trade remain well below the corresponding figures in other regions. This paper argues that a process of integration should take into account the differences between what can be achieved by negotiating with closer neighbours and with geographically distant partners. Also, at present there is an increasing competition from Asian goods, which have negatively affected Latin American producers. Among the lessons from the recent Asian experience are the economic links among countries that have helped to improve competitiveness as well as to foster the degree of convergence of the GDP growth rates of the participating countries.
    Keywords: regional integration, productive complementarity, competitiveness and trade barriers
    Date: 2013–06
  11. By: Chilosi, David; Federico, Giovanni
    Abstract: This paper contributes to the debate on globalization and the great divergence with a comprehensive analysis of trends, causes and effects of the integration of Asia in the world market from 1800 to the eve of World War Two, based on a newly compiled data-set. The analysis finds that: most price convergence occurred before 1870, with only little disintegration in the inter-war years; market integration was determined to a large extent by the fall of Western trading monopolies; it implied significant static welfare gains and emerges as a major cause of substantial improvements in the terms of trade.
    JEL: B1 O53 N0
    Date: 2013–11
  12. By: Nguyen, Ha Thi Hong; Bales, Sarah; Wagstaff, Adam; Dao, Huyen
    Abstract: With the movement toward universal health coverage gaining momentum, the global health research community has made significant efforts to advance knowledge about the impact of various schemes to expand population coverage. The impacts on efficiency, quality, and gaps in service utilization of reforms to provider payment methods are less well studied and understood. The current paper contributes to this limited knowledge by evaluating the impact of a shift by Vietnam's social health insurance agency from reimbursing hospitals on a fee-for-service basis to making a capitation payment to the district hospital where the enrollee lives. The analysis uses panel data on hospitals over the period 2005-2011 and multiple cross-section data sets from the Vietnam Household Living Standards Surveys to estimate impacts on efficiency, quality, and equity. The paper finds that capitation increases hospitals'efficiency, as measured by recurrent expenditure and drug expenditure per case, but has no effect on surgery complication rates or in-hospital deaths. In response to the shift to capitation, hospitals scaled down service provision to the insured and increased provision to the uninsured (who continue to pay out-of-pocket on a fee-for-service basis). The study points to the need to anticipate the intended and unintended effects of any payment reform and the trade-offs among policy objectives.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Health Law,Population Policies,Disease Control&Prevention
    Date: 2013–11–01
  13. By: SHIRK, Susan L.
    Abstract: After more than a decade of diplomacy designed to reassure the United States and Asian neighbors that it wasn’t a threat, Chinese foreign policy has turned more confrontational. The Chinese government and Communist Party make decisions by consensus, which theoretically should sustain a cautious foreign policy. It also would seem that China’s growing economic ties with its neighbors would motivate it to avoid conflict. However, examples of a newly assertive China abound. What can this trend tell us about the underlying characteristics of China’s political system?
    Keywords: Social and Behavioral Sciences, China, Asia, political economy, security
    Date: 2013–04–01
  14. By: Kyungsub Lee
    Abstract: We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return process and European option prices. The computation of arithmetic Asian option prices is straightforward whenever European option prices are available. Applications with numerical results under the Black-Scholes framework and the exponential L\'evy model are proposed.
    Date: 2013–11
  15. By: Broadberry, Stephen
    Abstract: As a result of recent work on historical national accounting, it is now possible to establish firmly the timing of the Great Divergence of living standards between Europe and Asia. There was a European Little Divergence as Britain and Holland overtook Italy and Spain, and an Asian Little Divergence as Japan overtook China and India. The Great Divergence occurred because Japan grew more slowly than Britain and Holland, starting from a lower level. Key turning points are identified around 1348 and 1500, and an explanatory framework is developed that can explain these divergences via the differential impact of shocks on differently structured economies. The key shocks were the Black Death of the mid-fourteenth century and the new trade routes which opened up from Europe to Asia and the Americas at the end of the fifteenth century. The key structural factors were the type of agriculture, the age of first marriage of females, the flexibility of labour supply and the nature of state institutions.
    JEL: B1 N0
    Date: 2013–11
  16. By: Situngkir, Hokky
    Abstract: The paper reports the possibility of Indonesian traditional artisans of weaving designs and crafts to explore the cellular automata, a dynamical model in computation that may yield similar patterns. The reviews of the cellular automata due to the perspective of weaving process reveals that the latter would focus on macro-properties, i.e.: the strength of structural construction beside the aesthetic patterns and designs. The meeting of traditional weaving practice and the computational model is delivered and open the door for interesting discourse of computer-aided designs for the traditional artists and designers to come.
    Keywords: cellular automata, weaving designs, computer-aided designs, Indonesia, crafts.
    JEL: Y2 Z1
    Date: 2013–11–18
  17. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: KEY ISSUES Context. The Thai economy has shown an impressive resilience to shocks and staged a strong recovery in 2012. However, growth slowed significantly in the first half of 2013 on account of the expiration of some domestic stimulus programs that were taken in 2012 in the wake of the flood disaster and weak external demand. The economy is being supported by strong fundamentals and expansionary fiscal and monetary policies. The government is seeking to shift public expenditure from boosting domestic consumption to infrastructure investment. Volatile capital flows have presented a challenge to macroeconomic policy. Outlook and risks. Growth is expected to recover in the second half of the year, but at a more gradual pace than in the past, with low inflation. The global economy presents downside risks from a possible slowdown in EM growth and capital flow volatility. In addition, the impact of unwinding policies to boost consumption may be larger than anticipated, while public investment projects might be delayed. Labor skills mismatches and infrastructure bottlenecks are holding back potential growth. Policy recommendations. With solid macroeconomic conditions, the key challenge is to foster higher inclusive growth with stability. Key recommendations are: ? Creating fiscal space for priority spending and gradually rebuilding policy buffers to prepare for adverse shocks. The government’s commitment to fiscal discipline would be buttressed by strengthening the medium-term fiscal framework. ? Allowing the exchange rate to continue to move flexibly in line with fundamentals and respond with a mix of macroeconomic policies and, if needed, capital flow measures to deal with capital flow surges. ? While the banking sector remains sound, the regulatory and supervisory frameworks for specialized and non-bank institutions needs to be strengthened. ? Planned infrastructure investments should be implemented to enhance competitiveness and promote inclusive growth.
    Keywords: Article IV consultation reports;Economic growth;Demand;Fiscal policy;Public investment;Capital flows;Debt sustainability;Monetary policy;Banking sector;Credit expansion;Economic indicators;Staff Reports;Press releases;Thailand;
    Date: 2013–11–11
  18. By: YOSHIHARA, Toshi
    Abstract: China’s recent assertiveness in the South China Seas is a harbinger of things to come. Beijing’s seapower project and the enormous resources it has enjoyed have opened up new strategic vistas for Chinese leaders and military commanders. With larger and more capable seagoing forces at its disposal, Beijing is well positioned to fashion sophisticated strategies that will be more effective and equally difficult to counter. While such strategies do not—yet—portend the fundamental reordering of maritime Southeast Asia, they will likely yield incremental dividends that advance China’s larger aims at sea.
    Keywords: Social and Behavioral Sciences, political economy, security, Asia, seapower, maritime projection of power, South China Sea
    Date: 2013–04–01
  19. By: Alberto Feenstra
    Abstract: During the eighteenth century the VOC imported over a billion small copper coins (doits) to Java, which is a remarkable operation for the world’s largest enterprise at that time, since these coins were unfit to pay for the company’s wholesale trade. This paper argues that the VOC responded to Java’s specific need for small coins, because people increasingly relied on the market for daily necessities and became less dependent on subsistence farming. The alternative explanations of population growth, substitution and inflation do not satisfactorily explain the increased demand for these copper doits. Therefore, this paper proposes that Java’s economy underwent a transformation, particularly after 1750.
    Keywords: Economic History, Money Suppply, Economic growth, Indonesia, Java
    Date: 2013–11
  20. By: De Smet, Dieter
    Abstract: The Employing Skilled Expatriates indicators analyze the skilled immigration regime relevant for foreign direct investment across 93 economies to provide comparable information about this regulatory space. The indicators focus on restrictions that control the inflow of skilled immigrants (quotas); the ease of hiring skilled expatriates (time and procedural steps to obtain a temporary work permit, existence of online application systems, availability of a one-stop shop and fast-tracking option); and the existence of a path to permanent residency and citizenship as well as the existence of spousal work permits. As governments increasingly seek to attract foreign direct investment as a driver of long-term development, reforming the investment climate -- including the skilled immigration regime -- is one policy option to consider. This analysis shows a positive correlation between the Employing Skilled Expatriates index and foreign direct investment inflows. As measured by the Employing Skilled Expatriates index, there is room for economies with a need for skilled workers to improve their immigration regimes as one means of attracting more foreign direct investment. In Singapore and the Republic of Korea, it only takes ten days on average to obtain a temporary work permit. In Honduras, the same process can take up to 22 weeks. The global average to obtain a temporary work permit is eight weeks. The process is the fastest in the East Asia and the Pacific region where it takes five weeks. With 11 weeks, the processing time in the Middle East and North Africa region is the slowest.
    Keywords: Climate Change Mitigation and Green House Gases,Human Migrations&Resettlements,Voluntary and Involuntary Resettlement,International Migration,Tertiary Education
    Date: 2013–11–01
  21. By: PEKKANEN, Saadia M.
    Abstract: This policy brief evaluates the trends in Japan’s space policy directions, and assesses their implications for regional and global security in three parts. First, it focuses on the role of public and private players pivotal to the country’s space directions, and the context in which they have operated. Second, it sets out the main institutional and legal changes they have helped bring about. Finally, third, it lays out some implications that bear upon other space powers like China and the United States.
    Keywords: Social and Behavioral Sciences, political economy, Japan, space policy, security, Asia
    Date: 2013–04–01
  22. By: International Monetary Fund. Monetary and Capital Markets Department
    Abstract: The Monetary Authority of Singapore (MAS) shows a very high level of compliance with the Basel Core Principles and demonstrates a strong commitment by MAS to their implementation. MAS’ current institutional reliability and its commitment to a prudent and sound domestic financial system have contributed to the strong economic development of Singapore and its role as one of the leading financial centers in the world. MAS has built a strong and experienced supervisory staff that has put in place an effective supervisory and regulatory framework that includes active and constructive engagement with the management and boards of financial institutions under MAS supervision. To a large degree, this is a consequence of the strong support of the current Singaporean government for an effective and well-resourced MAS. That said, a high degree of compliance with the core principles is not a guarantee (nor should it be) against the failure of banks. Banking supervision is intended to minimize the likelihood of bank failures, and to deal swiftly and effectively with troubled institutions to minimize the cost of any failures and to preserve financial stability.
    Keywords: Basel Core Principles;Banking sector;Bank supervision;Capital markets;Securities regulations;Securities markets;Insurance;Reports on the Observance of Standards and Codes;Singapore;
    Date: 2013–11–14
  23. By: Martin Brooke; Rhys R. Mendes; Alex Pienkowski; Eric Santor
    Abstract: The Latin American debt crises in the 1980s and the Asian crisis in the late 1990s both provided impetus for reforming the framework for restructuring sovereign debt. In the late 1980s, the Brady plan established the importance of substantive debt relief in addressing some crises. A decade later, as the Asian crisis faded, the G10 and major emerging market economies worked together to increase the flexibility of IMF lending and promoted the wider use of collective action clauses in foreign law bonds. More recently, the banking crisis of 2008-09 has led to the implementation of an ambitious financial sector reform agenda to reduce the risk of such a crisis occurring again. But reforms to reduce the incidence and cost of sovereign debt crises, such as those experienced in the euro area, have proceeded more slowly. The international community has a role to play in addressing this gap. In that regard, this paper is intended to stimulate debate on the problems in the current practices for sovereign debt restructuring and puts forward some proposals to improve the functioning of sovereign debt markets. The Bank of Canada and the Bank of England have collaborated on these issues in the past. For example, in 2001, Andy Haldane and Mark Kruger authored a joint paper on how to resolve sovereign debt crises in a more orderly and transparent manner. This current work builds on those ideas by exploring how state-contingent debt could further improve the system. Charlie Bean/John Murray London/Ottawa November 2013
    Keywords: International financial markets; International topics
    JEL: F34
    Date: 2013
  24. By: Horag Choi (Monash University)
    Abstract: The 1997-1998 Asian crisis countries experienced drastic collapses of macroeconomic aggregates followed by highly persistent underperformance of economies relative to their pre-crises periods. In this paper, we develop a small open economy model with heterogeneous producers which can explain the evolution of the number of establishments across sizes following the sudden stop in Korea: the larger the size of establishments, the slower the recovery for the number of the establishments. The model shows that the establishment composition can explain 40 percent of the short-run drop in TFP, and almost all of the persistently underperforming Korean TFP from the second year of the sudden stop. With the transition dynamics of the TFP, the model can closely match the responses of the macroeconomic aggregates to the sudden stop in Korea. The model also predicts that this highly persistent behavior of TFP coming from the establishment composition causes output to be 7.7 percent lower than its trend even 20 years after the shock.
    Date: 2013
  25. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: KEY ISSUES Context. Growth recovered and inflation declined sharply in 2013. Leverage has risen, with real estate a major beneficiary, but providing only a muted growth impulse. Intensive use of macroprudential measures recently stabilized house prices, which had grown rapidly. The financial sector has so far absorbed expectations of tapering by the Federal Reserve with limited volatility. Measures to encourage productivity growth continue to be rolled out, including through further tightening of foreign worker policies, which has pushed up wages. Outlook, risks and macroeconomic policies. Growth is likely to reach 3½ percent in 2013-14, supported by stronger G3 demand, despite softening in the region. A positive output gap and rising labor costs will raise core inflation, but headline inflation will stabilize on smaller asset price increases. External and domestic factors tilt the balance of growth risks to the downside. Cyclical conditions warrant a restrictive stance overall. The current policy of modest gradual appreciation is consistent with limiting the output gap and anchoring inflation expectations, while continued targeting of macroprudential policies will help contain asset prices and ensure prudent lending. The budgeted fiscal stimulus is warranted to support the goal of raising productivity to relieve future supply constraints. Financial sector issues. Significant risks have built up under very low interest rates, but appear manageable, although confirmation will come only once the cycle has turned. Regional and global interconnectedness also brings risks. A countercyclical capital buffer, stepped-up onsite bank inspections, strengthened fx liquidity management practices by banks, and vigorous enforcement of international AML/CFT commitments are advised. Higher leverage increases aggregate sensitivity to macroeconomic shocks and interest rate cycles, exacerbated by significant balance sheet heterogeneity. Demographic shifts. Prospective population aging and workforce shrinkage call for continuing to boost labor productivity, aided by the higher education levels of younger cohorts and continuing to tap foreign workers—though at a slower pace than previously. Recent commitments to strengthen social safety nets in a targeted manner, especially for the elderly, are welcome. External sector assessment. From a multilateral perspective and taking into account Singapore’s unique characteristics, the external position is stronger than warranted by fundamentals. Increased public spending and a tighter labor market caused by a slower pace of foreign worker inflows—consistent with the authorities’ plans—and appropriate adjustments in other countries should narrow the large current account surplus.
    Keywords: Article IV consultation reports;Economic growth;Monetary policy;Financial sector;Fiscal policy;Labor markets;Aging;Housing prices;Economic indicators;Staff Reports;Press releases;Singapore;
    Date: 2013–11–14
  26. By: Xiaohu Wang (Chinese University of Hong Kong); Jun Yu (Singapore Management University, School of Economics)
    Abstract: Large sample properties are studied for a …rst-order autoregression (AR(1)) with a root greater than unity. It is shown that, contrary to the AR coe¢ cient, the least- squares (LS) estimator of the intercept and its t-statistic are asymptotically normal without requiring the Gaussian error distribution, and hence an invariance principle applies. While the invariance principle does not apply to the asymptotic distribution of the LS estimator of the AR coe¢ cient, we show explicitly how it depends on the initial condition and the intercept. Also established are the asymptotic independence between the LS estimators of the intercept and the AR coefficient and the asymptotic independence between their t-statistics. Asymptotic theory for explosive processes is compared to that for unit root AR(1) processes and stationary AR(1) processes. The coefficient based test and the t test have better power for testing the hypothesis of zero intercept in the explosive process than in the stationary process.
    Date: 2013–11
  27. By: KAPLAN, Brad
    Abstract: Confrontations between China and other rival claimants in the South China Sea have gained increasing prominence in regional and international media, most recently during a 2012 standoff between Manila and Beijing over sovereignty of the Scarborough Shoals. The potential for miscalculation and escalation during these confrontations is of concern to policymakers in Washington in that the waterway is of vital strategic interest to the United States, and several of the rival claimants facing China are defense partners. A serious confrontation between China and one of these defense partners could well result in a broader crisis between China and the United States. This paper examines data relating to “significant†military confrontations in the South China Sea from 1974 to the present in an attempt to identify trends in the confrontations, the most likely future flashpoints, and the most likely antagonists. The brief concludes with policy recommendations related to deterring aggressive assertions in the South China Sea.
    Keywords: Social and Behavioral Sciences, Asia, security, political economy, South China Sea, maritime power projection, China
    Date: 2013–04–01
  28. By: International Monetary Fund. Monetary and Capital Markets Department
    Abstract: EXECUTIVE SUMMARY The Singapore financial system is highly developed, and well regulated and supervised. Singapore is one of the world’s largest financial centers, built around a core of domestic and international banks, and also offers a wide range of non-bank services. The authorities have given strong emphasis to integrity and stability in finance and to compliance with international standards, and have addressed most recommendations made by the 2004 FSAP. Singapore’s current regulation and supervision are among the best globally. The Monetary Authority of Singapore (MAS) oversees the entire financial system, and has the analytical and operational capabilities to do so effectively. Singapore is exposed to a broad array of domestic and global risks, especially in light of its interconnectedness with other financial centers. The most pressing vulnerability appears to stem from the rapid growth of credit and real estate prices in recent years, but the financial system is also exposed to possible spillovers from a future tightening of U.S. monetary policy, an economic slowdown in China, or a deterioration of economic conditions in Europe. The team’s stress tests suggest that these risks are manageable. This reflects banks’ large capital and other cushions, and the decisive macroprudential actions taken by MAS to address the threat of a bubble in the housing sector. Moreover, MAS has sought to address potential spillovers from other major financial centers by converting large retail branches operating in the domestic market into domestically incorporated subsidiaries, and by pressing in international fora for greater sharing of supervisory information on global systemically important financial institutions (G-SIFIs). Looking forward, the analysis suggests the importance of continuing to monitor closely cross-border interbank liabilities, and also of continuing to adjust macroprudential measures in response to domestic housing market conditions.
    Keywords: Financial system stability assessment;Financial sector;Banks;Credit risk;Bank supervision;Insurance;Stress testing;Capital markets;Macroprudential Policy;Singapore;
    Date: 2013–11–14

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