nep-sea New Economics Papers
on South East Asia
Issue of 2014‒03‒08
six papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Assessing the Experience of South Asia–East Asia Integration and India’s Role By Wignaraja, Ganeshan
  2. Explaining Foreign Holdings of Asia’s Debt Securities By Horioka, Charles Yuji; Nomoto, Takaaki; Terada-Hagiwara, Akiko
  3. Rising Inequality in Asia and Policy Implications By Zhuang, Juzhong; Kanbur, Ravi; Rhee, Changyong
  4. Measuring Manufacturing: How the Computer and Semiconductor Industries Affect the Numbers and Perceptions By Susan N. Houseman; Timothy J. Bartik; Timothy J. Sturgeon
  5. Performance Persistence of Islamic Equity Mutual Funds By Abdelbari El Khamlichi; Kamel Laaradh; Mohamed Arouri; Frédéric Teulon
  6. Globalization, Infrastructure, and Inclusive Growth By Winters, L. Alan

  1. By: Wignaraja, Ganeshan (Asian Development Bank Institute)
    Abstract: This paper examines the gains for South Asian economies from integrating with East Asia and India’s role in this process. Evidence of increased pan-Asian integration exists but the process is uneven. Bilateral trade has grown. As have bilateral foreign direct investment flows and free trade agreements (FTAs), albeit at a slower pace than trade. The integration process has been led by India and Pakistan with limited participation of smaller South Asian economies. Tackling key impediments in cross-border infrastructure, FTAs, trade barriers and business regulations, and barriers to services will foster further integration. Computable general equilibrium (CGE) simulations suggest that a South Asia–East Asia FTA offers the most gains for South Asia and that India has an incentive to include its neighbors in such an arrangement rather than going it alone with East Asia. The rest of South Asia will gain by deepening South Asian integration and fostering ties with East Asia.
    Keywords: pan-asian economic integration; south asia-east asia trade; infrastructure; reforms; free trade agreements
    JEL: F15 F17 O14 O24 O53
    Date: 2014–02–25
  2. By: Horioka, Charles Yuji (School of Economics, University of the Philippines); Nomoto, Takaaki (Asian Development Bank); Terada-Hagiwara, Akiko (Asian Development Bank)
    Abstract: In this paper, we analyze data on trends since 2000 in foreign holdings of government securities and other debt securities, with emphasis on Japan and developing Asia. We find that foreign residents generally increased their holdings of Asian debt securities during the sample period and in particular during the post-global financial crisis (GFC) period. Meanwhile, foreign holdings of debt securities have been declining in the eurozone. Foreign holdings of short-term debt securities were very volatile during the GFC period (2009–11), with a sharp drop in foreign holdings of short-term Asian debt securities that was followed by a renewed surge. Our empirical analysis suggests that despite the increase in foreign holdings of debt securities its share is still far lower than the optimal portfolio warranted by the capital asset pricing market theory. In other words, foreign investors’ home bias is still strong. The overall increase in foreign holdings of Asian debt securities appears to be driven by relatively stable exchange rates and the higher risk-adjusted returns on the debt securities of the region. Additionally, we find that investors were more “home-biased” during the GFC period and invested less in the markets of the major industrialized economies.
    Keywords: Government debt; government securities; government bonds; government bills; government notes; debt securities; debt financing; debt holdings; foreign debt holdings; international capital flows; short-term capital movements; cross-border portfolio investments; safe haven; home bias; capital asset pricing model; optimal portfolios; global financial crisis; eurozone; Japan; developing Asia
    JEL: F32 F34 G15 O53
    Date: 2014–01–01
  3. By: Zhuang, Juzhong (Asian Development Bank Institute); Kanbur, Ravi (Asian Development Bank Institute); Rhee, Changyong (Asian Development Bank Institute)
    Abstract: This paper looks at the recent trends of rising inequality in developing Asia, asks why inequality matters, examines the driving forces of rising inequality, and proposes policy options for tackling high and rising inequality. Technological change, globalization, and market-oriented reform have driven Asia’s rapid growth, but have also had significant distributional consequences. These factors have favored owners of capital over labor, skilled over unskilled workers, and urban and coastal areas over rural and inland regions. Furthermore, unequal access to opportunity, caused by institutional weaknesses and social exclusion, has compounded the impacts of these forces. All these combined have led to a falling share of labor income in national income, increasing premiums on human capital, and growing spatial disparity—all contributing to rising inequality. The three drivers of rising inequality cannot and should not be blocked, because they are the same forces that drive productivity and income growth. This paper outlines a number of policy options for Asian policy makers to consider in addressing rising inequality. These options, aiming to equalize opportunities and, thereby, reduce inequality, include efficient fiscal measures that reduce inequality in human capital, policies that work toward increasing the number and quality of jobs, interventions that narrow spatial disparity, and reforms that strengthen governance, level the playing field, and eliminate social exclusion.
    Keywords: growth; globalization; inequality; governance
    JEL: D63 O15 O53
    Date: 2014–02–21
  4. By: Susan N. Houseman (W.E. Upjohn Institute for Employment Research); Timothy J. Bartik (W.E. Upjohn Institute for Employment Research); Timothy J. Sturgeon (MIT)
    Abstract: Growth in U.S. manufacturing’s real value-added has exceeded that of aggregate GDP, except during recessions, leading many to conclude that the sector is healthy and that the 30 percent decline in manufacturing employment since 2000 is largely the consequence of automation. The robust growth in real manufacturing GDP, however, is driven by one industry segment: computers and electronic products. In most of manufacturing, real GDP growth has been weak or negative and productivity growth modest. The extraordinary real GDP growth in computer-related industries reflects prices for computers and semiconductors that, when adjusted for product quality improvements, are falling rapidly. Productivity growth in these industries, in turn, largely reflects product and process improvements from research and development, not automation. Although computer-related industries have driven growth in the manufacturing sector, production has shifted to Asia, and the U.S. trade deficit in these products has soared since the 1990s. The outsized effect computer-related industries have on manufacturing statistics also may distort economic relationships in the data and result in perverse research findings. Statistical agencies should take steps to assure that the influence that computer-related industries have on manufacturing-sector statistics is transparent to data users.
    Keywords: Manufacturing, computers, semiconductors, productivity, globalization, global value chains
    JEL: L60
    Date: 2014–02
  5. By: Abdelbari El Khamlichi; Kamel Laaradh; Mohamed Arouri; Frédéric Teulon
    Abstract: The debate over the under-performance or the over-performance of Islamic funds is not over yet. Hence, our literature review exhibits that all the previous works studied the Islamic equity funds without exploring the persistence of their performance, even if this issue is very important to address several questions in financial management. Our article contributes to the current literature by addressing this shortage; we proceed further with the aim of finding any consistency in funds’ performance. Using a sample of 111 Islamic equity funds over the period 2005 to 2011, the study is carried out through applying different performance measures and non-parametric tests of performance persistence over three equal sub-periods. Our measures of performance show that Islamic funds do not constitute a homogenous group, but over the whole period, Malaysian and Saudi Arabian funds perform better. We find evidence that supports non-persistence in performance or rather the persistence of non-performance of Islamic mutual funds during and after the last financial crisis. This raises the question of the management strategies implemented by the banks managing Islamic funds.
    Date: 2014–02–25
  6. By: Winters, L. Alan (Asian Development Bank Institute)
    Abstract: This paper covers threes issues: first, defining and measuring inclusive growth; second, the relationship between international trade and inequality; and third, the links between infrastructure and inequality. Both international trade and infrastructure make it easier for people to exchange goods and services and to increase income by allowing specialization, economies of scale, variety, etc. The gains are important not only in aggregate, but also at an individual level, and different people’s ability to take advantage of them varies. Hence each can increase inequality. Critical to sharing the gains from trade is mobility—specifically labor mobility, which determines the capacity of people to move from areas, sectors, skills, or firms of low or declining opportunity to those of higher opportunity. In the context of inclusive growth, this constitutes a challenge. However, the answer should not be to eschew opening up the economy or building infrastructure, but to do so in an informed way and seek to undertake complementary policies that help the less well-off take advantage of them.
    Keywords: trade; infrastructure; inequality; labor mobility; trade opening; globalization
    JEL: F16 H54
    Date: 2014–02–23

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