nep-sea New Economics Papers
on South East Asia
Issue of 2014‒05‒17
sixteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Asian Monetary Integration: A Japanese Perspective By Kawai, Masahiro
  2. The evolution of Vietnamese industry By Anh, Nguyen Thi Tue; Duc, Luu Minh; Chieu, Trinh Duc
  3. Exporting and productivity: The role of ownership and innovation in the case of Vietnam By Newman, Carol; Rand, John; Tarp, Finn; Thi Tue Anh, Nguyen
  4. Trade linkages and the globalisation of inflation in Asia and the Pacific By Auer, Raphael; Mehrotra, Aaron
  5. The Effect of Elections on Economic Growth: Results from a Natural Experiment in Indonesia By Moricz, Sara; Sjöholm, Fredrik
  6. Firm-level Evidence on Productivity Differentials and Turnover in Vietnamese Manufacturing By Doan Thi Thanh Ha; Kozo KIYOTA
  7. Migrant Networks and Trade: The Vietnamese Boat People as a Natural Experiment By Christopher PARSONS; Pierre-Louis VÉZINA
  8. Assessing the impact of fta: a case study of pakistan- malaysia fta By mahmood, Hamid mahmood; gul, Sidra gul
  9. The asset/liability structure of the Philippine banks and non-bank financial institutions in 2000s : a preliminary study for financial access analyses By Kashiwabara, Chie
  10. Invoicing Currency in International Trade: An Empirical Investigation and Some Implications for the Renminbi By Edwin L.-C. Lai; Xiangrong Yu
  11. Exporting and foreign direct investment spillovers: Cambodia.s experience By Ung, Luyna; Chhair, Sokty
  12. Reserve currencies: Can multiplicity work? By Satyendra Kumar Gupta; Ashima Goyal
  13. Clustering, competition, and spillover effects: Evidence from Cambodia By Chhair, Sokty; Newman, Carol
  14. Resilience and social capital: By Bernier, Quinn; Meinzen-Dick, Ruth Suseela
  15. Dynamic Two-way Relationship between Exporting and Importing: Evidence from Japan By Kazunobu HAYAKAWA; Toshiyuki MATSUURA
  16. Reciprocal beliefs and out-group cooperation: evidence from a public good game By Brañas-Garza, Pablo; Kernohan, David; Oyediran, Olusegun; Rivas, M. Fernanda

  1. By: Kawai, Masahiro (Asian Development Bank Institute)
    Abstract: This paper discusses Japan's strategy for Asian monetary integration. It argues that Japan faces three major policy challenges when promoting intraregional exchange rate stability. First, there must be some convergence of exchange rate regimes in East Asia, and the most realistic option is for the region's emerging economies to adopt similar managed floating regimes—rather than a peg to an external currency. This requires major emerging economies—particularly the People's Republic of China (PRC)—to move to a more flexible regime vis-á-vis the US dollar. Second, given the limited degree of the yen's internationalization and the lack of the renminbi's (or the prospect of its rapid) full convertibility, it is in the interest of East Asia to create a regional monetary anchor through a combination of some form of national inflation targeting and a currency basket system. Emerging economies in the region need to find a suitable currency basket for their exchange rate target, such as a special drawing rights-plus (SDR+) currency basket—i.e., a basket of the SDR and emerging East Asian currencies. Third, if the creation of a stable regional monetary zone is desirable, the region must have a country or countries assuming a leadership role in this endeavor. There is no question that Japan and the PRC are such potential leaders, and the two countries need to collaborate closely with each other. To assume a leadership role, together with the PRC, in creating a stable monetary zone in Asia, Japan needs to make significant efforts at the national and regional levels and further strengthen financial cooperation. Practical steps that Japan could take include (i) restoring sustained economic growth through Abenomics; (ii) transforming Tokyo into a globally competitive international financial center; (iii) further strengthening regional economic and financial surveillance (Economic Review and Policy Dialogue and ASEAN+3 Macroeconomic Research Office) and regional financial safety nets (Chiang Mai Initiative Multilateralization) and creation of an Asian currency unit index; and (iv) launching serious policy discussions focusing on exchange rate issues to achieve intraregional exchange rate stability.
    Keywords: currency internationalization; regional monetary integration; international policy coordination; exchange rate stability
    JEL: F31 F32 F33 F42
    Date: 2014–04–22
  2. By: Anh, Nguyen Thi Tue; Duc, Luu Minh; Chieu, Trinh Duc
    Abstract: The transfer from an import-substitution to an export-orientation strategy has been in effect in Vietnam since the reform process, Doi Moi, necessitating the reformulation of macroeconomic, trading and sectoral policies. As a result, the industry sector h
    Keywords: industry, evolution, policy, productivity, Vietnam
    Date: 2014
  3. By: Newman, Carol; Rand, John; Tarp, Finn; Thi Tue Anh, Nguyen
    Abstract: In this paper, we investigate the relationship between exporting and productivity in the case of Vietnam using an extensive firm level panel dataset for the period 2005-11. We separate out productivity effects of exporting due to self-selection allowing u
    Keywords: learning by exporting, self-selection, productivity, Vietnam, firm ownership, innovation
    Date: 2014
  4. By: Auer, Raphael (Swiss National Bank); Mehrotra, Aaron (Bank for International Settlements)
    Abstract: Some observers argue that increased real integration has led to greater co-movement of prices internationally. We examine the evidence for cross-border price spillovers among economies participating in the pan-Asian cross-border production networks. Starting with country-level data, we find that both producer price and consumer price inflation rates move more closely together between those Asian economies that trade more with one another, ie that share a higher degree of trade intensity. Next, using a novel data set based on the World Input-Output Database (WIOD), we examine the importance of the supply chain for cross-border price spillovers at the sectoral level. We document the increasing importance of imported intermediate inputs for economies in the Asia-Pacific region and examine the impact on domestic producer prices of changes in costs of imported intermediate inputs. Our results suggest that real integration through the supply chain matters for domestic price dynamics in the Asia-Pacific region.
    Keywords: price level; inflation; deflation; international trade
    JEL: E31 F14 F15 F40
    Date: 2014–04–01
  5. By: Moricz, Sara (Lund University); Sjöholm, Fredrik (Lund University)
    Abstract: Does democracy increase economic growth? Previous literature tends to find a positive effect but does also suffer from possible endogeneity problems: democratization is typically not random and might be affected by factors that also have an impact on economic growth. This paper narrows down the question to empirically estimating the causal effect of local elections on local economic growth in Indonesia by using a quasi-experimental research method. The first direct elections of district leaders in Indonesia were performed in a staggered manner, and decided such that the year of election is exogenous. Thus, growth in districts that have had their first elections of district heads can be compared with growth in districts that have not had a direct election, which more specifically is performed by using a difference-in-difference approach. Our estimations show no general effect of local elections on economic growth. The result is robust to various robustness tests and is supported by data that show small effects of elections on governance.
    Keywords: Democracy; Elections; Growth; Indonesia; Natural experiment
    JEL: H11 O10 O43
    Date: 2014–05–08
  6. By: Doan Thi Thanh Ha (International Graduate School of Social Sciences, Yokohama National University and Faculty of International Economics and Business, Foreign Trade University); Kozo KIYOTA (Keio Economic Observatory, Keio University)
    Abstract: This paper examines the relationship between productivity differentials and firm turnover in Vietnamese manufacturing. We utilize firm-level data between 2000 and 2009, including the year 2007, when Vietnam joined the World Trade Organization (WTO). Our major findings are twofold. First, the productivity of entrants, survivors, and exiters increased simultaneously from 2006 to 2007. This result suggests that the cutoff productivity level increased after trade liberalization. Second, the resource reallocation between firms was facilitated after the liberalization. These findings are consistent with the implications of the recent models of international trade and firm heterogeneity.
    Keywords: Total factor productivity, Aggregate productivity, Trade Liberalization, Firm turnover, Vietnam
    JEL: O12 D22 O47 F14
    Date: 2014–04
  7. By: Christopher PARSONS (University of Oxford); Pierre-Louis VÉZINA (University of Oxford)
    Abstract: We provide cogent evidence for the causal pro-trade effect of migrants and in doing so establish an important link between migrant networks and long-run economic development. To this end, we exploit a unique event in human history, the exodus of the Vietnamese Boat People to the US. This episode represents an ideal natural experiment as the large immigration shock, the first wave of which comprised refugees exogenously allocated across the US, occurred over a twentyyear period during which time the US imposed a complete trade embargo on Vietnam. Following the lifting of trade restrictions in 1994, the share of US exports going to Vietnam was higher and more diversified in those US States with larger Vietnamese populations, themselves the result of larger refugee inflows 20 years earlier.
    Keywords: : Migrant Networks, US Exports, Natural Experiment
    JEL: F14 F22
    Date: 2014–09
  8. By: mahmood, Hamid mahmood; gul, Sidra gul
    Abstract: The paper focuses on understanding the dynamics of pre and post Free Trade Agreement (FTA) agreement between Pakistan and Malaysia. It makes use of descriptive analysis and SMART model for simulating the impact of trade liberalization and its impact on the local and ASEAN economy. The impact is measured for top five export product of Pakistan and separate case of automobile sector of Pakistan understanding the changes in export, revenue, trade creation and diversion and welfare impact. The results from the descriptive analysis suggests trade in favor of Malaysia while simulation shows increase in export, welfare and trade diversion with automobile sector showing insignificant impact on welfare.
    Keywords: Simulation, trade creation, trade diversion, export revenue and welfare
    JEL: F10 F15 F17
    Date: 2014–05–30
  9. By: Kashiwabara, Chie
    Abstract: Based on the consolidated statements data of the universal/commercial banks (UKbank) and non-bank financial institutions with quasi-banking licenses, this paper presents a keen necessity of obtaining data in detail on both sides (assets and liabilities) of their financial conditions and further analyses. Those would bring more adequate assessments on the Philippine financial system, especially with regard to each financial subsector's financing/lending preferences and behavior. The paper also presents a possibility that the skewed locational and operational distribution exists in the non-UKbank financial subsectors. It suggests there may be a significant deviation from the authorities' (the BSP, SEC and others) intended/anticipated financial system in the banking/non-bank financial institutions' real operations.
    Keywords: Philippines, Financial institutions, Banks, Non-banking, Credit, Monetary policy, Credit channel, Financial intermediaries, Non-bank financial institutions
    JEL: E42 E52 G21 G38
    Date: 2014–04
  10. By: Edwin L.-C. Lai (Hong Kong University of Science and Technology and Hong Kong Institute for Monetary Research); Xiangrong Yu (Hong Kong Institute for Monetary Research)
    Abstract: To play the role of a unit of account, an international currency must be a currency widely used to invoice international trade. This paper investigates the determinants of the use of currency in trade invoicing and evaluates the potential of the renminbi for the denomination of cross-border transactions in the Asia-Pacific region. In particular, we develop a simple model and establish the evidence showing that there is a convex relationship between the invoicing share of a currency and the economic size of its issuing country because of a coalescing effect and thick market externalities. We use the ratio of the foreign exchange turnover share of a currency to the global GDP share of its issuing country as a proxy for the size of thick market externalities, which we argue reflects capital account openness, financial development, and exchange rate stability of a country. This ratio is very small for the renminbi compared with that for established international currencies. Our quantitative analysis suggests that the renminbi can be a major invoicing currency in the region only if China sufficiently opens up its capital account and liberalizes its financial sector. We also draw a parallel between the renminbi and the euro and forecast the invoicing share of the renminbi in the Asia-Pacific region if the renminbi market attained the same degree of thickness as the euro.
    JEL: F33 F36 F47
    Date: 2014–04
  11. By: Ung, Luyna; Chhair, Sokty
    Abstract: One feature of exporting firms in Cambodia is that they are not of domestic origin but are foreign firms that export from the moment they are established in Cambodia. In this paper we examine the extent to which the presence of foreign-owned export firms
    Keywords: exports, foreign direct investment, institutional constraints, spillovers, Cambodia
    Date: 2014
  12. By: Satyendra Kumar Gupta (Indira Gandhi Institute of Development Research); Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: The paper analyzes the potential rise of new reserve currencies in the context of the economic and political determinants of an international currency. Two models analyze the role of soft political power, switching costs to a new currency and transaction costs in the rise of a new currency. Quantitative indices are developed to measure these factors, which are then empirically tested and found to be statistically significant in determining the rise of international currency. The study further explores the greater use of Renminbi in East Asia and the trade integration in this region.
    Keywords: Reserve currencies, network benefilts, transaction costs, bargaining power, Renminbi
    JEL: F33 F55 O53
    Date: 2014–03
  13. By: Chhair, Sokty; Newman, Carol
    Abstract: The potential benefits of the geographical clustering of economic activity have been well documented in the literature, yet there is little empirical evidence quantifying these effects in developing country contexts. This is surprising given the emphasis
    Keywords: clustering, productivity spillovers, competition effects, informal firms, Cambodia
    Date: 2014
  14. By: Bernier, Quinn; Meinzen-Dick, Ruth Suseela
    Abstract: Increasingly, resilience is being incorporated into planning and social protection policy. People have been facing shocks, both natural and anthropogenic, forever, devising and innovating a variety of institutional responses to cope with, recover from, and prevent future impacts. Central to these shocks and this coping capacity, but often underexplored, is the role of social capital. This paper, using the case studies of iddirs (funeral societies) in Ethiopia and migrant networks in the Philippines, explores the contribution of local forms of social capital to building and strengthening the resilience of individuals and communities, focusing on their contributions to coping, adaptive, and transformative capacities. This paper argues that understanding clearly the role that existing social capital can play in building resilience is a necessary first step for policymakers. The authors suggest policy interventions to fill gaps where and when necessary while supporting and deepening existing social capital.
    Keywords: food security, Nutrition security, Community organizations, Networks, resilience, Social capital,
    Date: 2014
  15. By: Kazunobu HAYAKAWA (Bangkok Research Centre, Institute of Developing Economies, Thailand); Toshiyuki MATSUURA (Keio Economic Observatory, Keio University)
    Abstract: In this paper, we investigate the dynamic nature of trading using Japanese firm-level data. Specifically, we examine state dependence and cross effects in exporting and importing. Our findings are as follows. First, we found significant state dependence and cross effects in exporting and importing. Second, those effects diminish over time. Third, such state dependence and cross effects are found to be market-specific. Furthermore, such market specificity is more significant in small and medium-sized enterprises. Last, past export/import intensity matters in the current trade status.
    Keywords: : Japan, Firm-level, Two-way relationship
    JEL: F10 F13 F15
    Date: 2014–08
  16. By: Brañas-Garza, Pablo; Kernohan, David; Oyediran, Olusegun; Rivas, M. Fernanda
    Abstract: This experimental study examines latent racial prejudice toward out-groups among 152 Spanish college students when they make guesses about the contributions of others in a public good game. Prejudice is examined firstly from the perspective of a two-sided, implicitly-held belief toward any of the specified out-groups: Africans, Asians, Latin Americans and Western. Secondly, from an ordinal perspective of highest negative (positive) prejudice. Lastly models of racial beliefs are fitted for the four out-groups. Results suggest subjects expect Africans and Latin Americans to be less cooperative, but Asians and Western to be more cooperative, than they actually are. We also find that racial prejudices do not have unique determinants across the out-groups under study, nor do the determining factors work in similar directions.
    Keywords: Beliefs, Implicit Cognition, Multiculturalism, Prejudice, Public Good Game, Stereotypes
    JEL: C91 H41 J15
    Date: 2014–05–13

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