nep-sea New Economics Papers
on South East Asia
Issue of 2014‒08‒16
twenty-two papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Modeling financial integration, intra-EMU and Asian-US external imbalances By Karl Farmer; Irina Ban
  2. Performance of Thailand Banks after the 1997 East Asian Financial Crisis By Mahathanaseth, Itthipong; Tauer, Loren W.
  3. Lao PDR Urban Development Sector Assessment, Strategy, and Road Map By Asian Development Bank (ADB); ; ;
  4. Asian Monetary Integration : A Japanese Perspective By Masahiro Kawai
  5. The Impact of Crude Oil Price on Islamic Stock Indices of South East Asian (SEA) Countries: A Comparative Analysis By Abdullah, Ahmad Monir; Saiti, Buerhan; Masih, Abul Mansur M.
  6. The Renminbi and Exchange Rate Regimes in East Asia By Masahiro Kawai; Victor Pontines
  7. Why Complementarity Matters for Stability—Hong Kong SAR and Singapore as Asian Financial Centers By Vanessa Le Lesle; Franziska Ohnsorge; Minsuk Kim; Srikant Seshadri
  8. Distributional impacts of the 2008 global food price spike in Vietnam By McKay, Andy; Tarp, Finn
  9. Rising Inequality in Asia and Policy Implications By Zhuang, Juzhong; Kanbur, Ravi; Rhee, Changyong
  10. Should Parents Work Away from or Close to Home? The Effect of Temporary Parental Absence on Child Poverty and Children’s Time Use in Vietnam By Nguyen Viet Cuong; Vu Hoang Linh
  11. Brunei Darussalam: Statistical Appendix By International Monetary Fund. Asia and Pacific Dept
  12. Malaysia: 2013 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Malaysia By International Monetary Fund. Asia and Pacific Dept
  13. Regional Stock Market Integration in Singapore: A Multivariate Analysis By Frédéric TEULON; Khaled GUESMI; Selim MANKAI
  14. Improving Agricultural Productivity and Rural Livelihoods: A Knowledge-Sharing Experience: Summary of the Proceedings of the 2011 People’s Republic of China–Asian Development Bank Knowledge Sharing Platform on Agricultural and Rural Development By Asian Development Bank (ADB); ; ;
  15. A Note on Nominal and Real Devaluation in Laos By Phouphet Kyophilavong; Muhammad Shahbaz; Gazi Salah Uddin
  16. The Nexus Between Financial Development and Economic Growth in Laos By Phouphet KYOPHILAVONG; Gazi Salah Uddin; Muhammad Shahbaz
  17. The Poor, the Prosperous and the ?Inbetweeners?: A Fresh Perspective on Global Society, Inequality and Growth By Peter Edward; Andy Sumner
  18. Foreign Bank Behavior during Financial Crises By Jonathon Adams-Kane; Julián Caballero; Jamus Lim
  19. How Migrant Heterogeneity Influences the Effect of Remittances on Educational Expenditure:Empirical Evidence from the Cambodian Socio-Economic Survey By Masamune Iwasawa; Mitsuo Inada; Seiichi Fukui
  20. Republic of Korea: 2013 Article IV Consultation-Staff Report; Press Release and Statement by the Executive Director for the Republic of Korea By International Monetary Fund. Asia and Pacific Dept
  21. Has Financial Liberalization Improved Economic Efficiency in the Republic of Korea? Evidence from Firm-Level and Industry-Level Data By Jungsoo Park; Yung Chul Park
  22. Financial Stability and Financial Inclusion By Peter J. Morgan; Victor Pontines

  1. By: Karl Farmer (University of Graz); Irina Ban (Babes-Bolyai-University Cluj-Napoca)
    Abstract: Intra-EMU external imbalances in the pre-crisis period up to 2008 are traditionally explained by EMU-oriented factors, e.g. euro-related financial integration. Chen et al. (2013) also emphasize external trade shocks, such as the competitive challenge of emerging Asia and oil exporters to EMU-periphery's exports. Moreover, Asian-US external imbalances are attributed to financial integration between East Asia and the USA in the aftermath of the East-Asian currency crises in the late 1990s (Angeletos et al. 2011). Acknowledging these empirical facts this paper develops a Buiter (1981) three-country (EMU, Asia, US), two-region (EMU core, EMU periphery) OLG model to investigate the effects of both intra-EMU and Asian-US financial integration on intra- EMU, Asian and US external imbalances. We find that the widening of the intra-EMU external imbalances, in particular of trade imbalances, is related to the growth in Asian-US imbalances and the dynamic inefficiency of the world economy, caused by excessive saving in Asia.
    Keywords: External Imbalances; European Economic and Monetary Union; Overlapping Generations; Three-Country Model
    Date: 2014–07
  2. By: Mahathanaseth, Itthipong; Tauer, Loren W.
    Keywords: Financial Economics, Production Economics,
    Date: 2014
  3. By: Asian Development Bank (ADB); (Southeast Asia Department, ADB); ;
    Abstract: This urban development sector assessment, strategy, and road map documents the strategic investment priorities of the Government of the Lao People’s Democratic Republic and the Asian Development Bank (ADB). It identifies the three priority areas: (i) strengthening of urban, regional, and environmental planning and management; (ii) planning and development of corridor towns; and (iii) infrastructure investments in other priority urban areas.
    Keywords: adb, asian development bank, asdb, asia, pacific, poverty asia, lao pdr, lao, laos, transport, urban, urban development, urban infrastructure, urban planning, planning, land management, housing policy, city, village, municipality, migration, population, utilities, water supply, electricity supply, town, thesaban
    Date: 2012–08
  4. By: Masahiro Kawai (Asian Development Bank Institute (ADBI))
    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-à-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: Asian monetary integration, Japan, currency, exchange rate regime, East Asia, SDR, currency basket, monetary zone, PRC, Chiang Mai
    JEL: F31 F32 F33 F42
    Date: 2014–04
  5. By: Abdullah, Ahmad Monir; Saiti, Buerhan; Masih, Abul Mansur M.
    Abstract: An understanding of how volatilities of and correlations between commodity returns and Islamic stock indices change over time including their directions and size are of crucial importance for both the domestic and international investors with a view to diversifying their portfolios for hedging against unforeseen risks. This paper is the first attempt to add value to the existing literature by empirically testing for the ‘time-varying’ and ‘scale dependent’ volatilities of and correlations between the selected Islamic stock indices of South East Asian countries and selected commodities for enhancing portfolio diversification benefits. The methodologies appropriate to achieving the objectives were the recently introduced dynamic conditional correlations and wavelet decompositions. Our findings tend to suggest that there is a theoretical relationship between the selected Islamic stock indices and the selected commodities and that the Islamic stock indices of Singapore, Philippines and Indonesia are leading the other Islamic stock indices and the commodities (as evidenced in the Vector Error-Correction models). Consistent with these results, our analysis based on the application of the recent wavelet technique MODWT tends to indicate that the Singapore Islamic index is leading the other Islamic indices and the commodities. From the point of view of portfolio diversification benefits based on the extent of dynamic correlations between variables, our results tend to suggest that an investor should be aware that the Philippine Islamic stock index is less correlated with the crude oil in the short run (as evidenced in the continuous wavelet transform analysis) and that an investor holding the crude oil can gain by including the Malaysian Islamic stock index in his/her portfolio (as evidenced in the Dynamic conditional correlations analysis).
    Keywords: Commodity, Islamic Stock Index Returns (ISIR), MODWT, CWT, DCC-MGARCH, Diversification, Causality
    JEL: C58 Q43
    Date: 2014–06–28
  6. By: Masahiro Kawai (Asian Development Bank Institute (ADBI)); Victor Pontines
    Abstract: With the rise of the People’s Republic of China (PRC) as the world’s largest trading nation (measured by trade value) and second largest economic power (measured by GDP), its economic influence over the neighboring emerging economies in East Asia has also risen. The PRC introduced some exchange rate flexibility in July 2005, and in the wake of the global financial crisis has been pursuing a policy to internationalize its currency, the renminbi (RMB). Clearly the exchange rate policy of the PRC has significant implications for exchange rate regimes in emerging East Asia. This paper examines the behavior of the RMB exchange rate and the impact of RMB movements on those of other currencies in emerging East Asia during the period 2000–2014. We apply the Frankel–Wei regression model to identify changes in the RMB exchange rate regime over time and a modified version of the model, developed by the authors in their earlier paper, to estimate the RMB weight in an emerging East Asian economy’s currency basket. We find that the US dollar continues to be the dominant anchor currency in the region, while the RMB has taken on increasing importance in the currency baskets of many East Asian economies in recent years. The paper also explores how monetary and currency cooperation—led by the PRC and Japan—can promote intra-East Asian exchange rate stability under the pressure of rising financial market openness in the PRC.
    Keywords: Remminbi, China, PRC, exchange rate regime, East Asia, exchange rate policy, the Frankel–Wei model, Japan, financial market openness
    JEL: F15 F31 F36 F41 O24
    Date: 2014–05
  7. By: Vanessa Le Lesle; Franziska Ohnsorge; Minsuk Kim; Srikant Seshadri
    Abstract: There is much speculation regarding a “race for dominance†among financial centers in Asia, arising from the anticipated financial opening up of China. This frame of reference is, to an extent, a predilection that results from a traditional understanding of financial centers as possessing historical, geographic, and scale economy advantages. This paper, however, suggests that there is an alternative prism through which the evolution of financial centers in Asia needs to be viewed. It underscores the importance of “complementarity†rather than “dominance†to better serve regional and global financial stability. We posit that such complementarity is vital, through network analysis of the roles of Hong Kong SAR and Singapore as the current leading financial centers in the region. This analysis suggests that a competition for dominance can result in de-stabilizing levels of interconnectivity that render the global “network†as a whole more susceptible to rapid propagation of shocks. We then examine the regulatory and policy challenges that may be encountered in furthering such complementary coexistence.
    Keywords: Offshore financial centers;Hong Kong SAR;Singapore;Asia;Financial sector;Banks;Regional integration;Interconnectedness;Networks, financial institutions and services, government policy and regulation
    Date: 2014–07–08
  8. By: McKay, Andy; Tarp, Finn
    Abstract: Agriculture and food cultivation production remains a key sector in the Vietnamese economy in terms of productive activities, income generation, and national export earnings. Higher world market prices should therefore in principle have a beneficial impac
    Keywords: food prices, rice, Vietnam, transmission
    Date: 2014
  9. By: Zhuang, Juzhong; Kanbur, Ravi; Rhee, Changyong
    Keywords: Agricultural and Food Policy, Production Economics,
    Date: 2014
  10. By: Nguyen Viet Cuong; Vu Hoang Linh
    Abstract: Working away from home might bring higher earnings than working near home. However, the absence of parents due to work can have unexpected effects on children. This paper examines the effects of the temporary absence of parents on the well-being of children aged 5–8 years old in Vietnam, using indicators of household poverty, per capita consumption expenditure, and child time allocation. The paper relies on OLS and fixed-effects regression and panel data from the Young Lives surveys in 2007 and 2009. It finds a positive correlation between parental absence and per capita expenditure. Parental absence tends to increase per capita food expenditure instead of per capita nonfood expenditure. Regarding the way children spend their time, there are no statistically significant effects of parental absence.
    Keywords: parental migration, child poverty, remittances, impact evaluation, Vietnam.
    JEL: O15 R23 I32
    Date: 2014–07–24
  11. By: International Monetary Fund. Asia and Pacific Dept
    Keywords: Gross domestic product;Revenues;Government expenditures;Exports;Imports;Financial soundness indicators;Oil production;Energy sector;Consumer price indexes;Balance of payments;Statistical annexes;Brunei Darussalam;
    Date: 2014–07–09
  12. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: The IMF staff report for the 2013 Article IV Consultation focuses on Malaysia’s economic developments and policies. The IMF report discusses that continued growth in domestic demand, especially investment, and a pickup in external demand should help maintain robust growth going forward despite the fiscal tightening. Amidst concerns about Malaysia’s public finances and sharp narrowing of the external surplus in spring–summer of 2013, authorities have taken timely action to secure fiscal sustainability and assure markets. It suggests that authorities’ decisions in 2013 are close to a fiscal policy breakthrough aiming to contain federal debt and related fiscal risks.
    Keywords: Article IV consultation reports;Economic growth;Human capital;Fiscal policy;Capital outflows;Monetary policy;Bank supervision;Stress testing;Financial stability;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Malaysia;Housing prices;Housing;
    Date: 2014–03–14
  13. By: Frédéric TEULON; Khaled GUESMI; Selim MANKAI
    Abstract: This paper evaluates the time-varying integration of the Singapore stock market in the ASEAN-5 region based on
    Keywords: time-varying integration, emerging markets, ICAPM, risk premium, c-DCC-FIAPARCH.
    JEL: C32 F36 G11
    Date: 2014–07–24
  14. By: Asian Development Bank (ADB); (East Asia Department, ADB); ;
    Abstract: The Asian Development Bank (ADB) and the People’s Republic of China (PRC) have been actively exploring knowledge partnerships to expand mutual learning with other developing member countries (DMCs) in key sectors such as agriculture, natural resources, transport, and urbanization. This publication documents the knowledge and experiences on agricultural development and rural livelihood improvement shared during the Knowledge Sharing Platform (KSP) held in Beijing and Henan Province in November 2011. Participants from the PRC and 12 other DMCs discussed topics that included policies and institutional mechanisms to promote modern agriculture, agricultural value chain and logistics system development, bridging of agricultural research with practices, rural infrastructure and green development, and financial development in rural areas.
    Keywords: china, prc, knowledge partnerships, agriculture, agricultural development, rural livelihood, agricultural value chain, agricultural logistics system, rural development, agricultural research, circular economy, rural finance
    Date: 2013–04
  15. By: Phouphet Kyophilavong; Muhammad Shahbaz; Gazi Salah Uddin
    Abstract: In this paper, we investigate whether or not nominal devaluation leads to real devaluation in Laos by using the ARDL bounds testing and the Granger causality test in a VECM framework. Our empirical evidence shows that nominal devaluation Granger causes real devaluation in short run and long run. This finding implies that nominal devaluation leads to real devaluation.
    Keywords: Nominal devaluation, real devaluation, Laos
    JEL: F31
    Date: 2014–07–24
  16. By: Phouphet KYOPHILAVONG; Gazi Salah Uddin; Muhammad Shahbaz
    Abstract: The relationship between financial development and economic growth is not conclusive in existing economics literature. The aim of this paper is to test two hypotheses: ‘supply-leading’ hypothesis and ‘demand-following’ hypothesis, using Laos time series data. The ARDL bounds testing approach to cointegration is used to carry out this task. Our results confirm the presence of feedback effect between both variables. Financial development promotes economic growth and in resulting, economic growth leads financial development.
    Keywords: Finance-growth nexus, ARDL approach, Granger causality, Laos
    JEL: O11 O16 O53
    Date: 2014–07–24
  17. By: Peter Edward (Newcastle Universtiy Business School); Andy Sumner (Institute of Development Studies, Sussex)
    Abstract: What has happened to inequality between and within countries since 1990? In this paper we explore who have been the winners and losers from global growth since 1990. We find that falls in total global inequality in the last 30 years are predominantly attributable to rising prosperity in China. We also identify a persistent global structure of two relatively homogeneous clusters (the poor/insecure and secure/prosperous). We detect the emergence of a ?new global middle? but question whether this implies the end of the historical two-cluster world rather than merely a transition as some people move from the poor/insecure cluster into the secure/prosperous cluster. Nevertheless, we do identify five different stylised patterns of national growth: pro-poor growth (e.g. Ethiopia); pro-middle growth (e.g. Brazil); anti-poor growth (e.g. Nigeria); anti-middle growth (e.g. Zambia) and equitable growth (e.g. Vietnam). We also find that 15 per cent of growth from 1990 to 2010 went to the world?s richest 1 per cent, while just a modest amount of redistribution would have ended $2 poverty. If the share of global growth between 1990 and 2010 flowing to those who were living on under $2/day in 2010 had increased from 5 per cent to just 12 per cent, this would have been sufficient to end $2 poverty today. Persistence of global poverty, it seems, is not due to insufficient global growth but to a reluctance among the secure/prosperous cluster to forego a small share of their benefits from global growth in favour of fairly modest redistribution to the global poor.(?)
    Keywords: The Poor, the Prosperous and the ?Inbetweeners?: A Fresh Perspective on Global Society, Inequality and Growth
    Date: 2014–03
  18. By: Jonathon Adams-Kane; Julián Caballero; Jamus Lim
    Abstract: This paper studies whether lending by foreign banks is affected by financial crises. The paper pairs a bank-level dataset of foreign ownership with information on banking crises and examines whether the credit supply of majority foreignowned banks that underwent home-country crises differs systematically from that of other foreign banks. The baseline results show that banks exposed to homecountry crises in 2007 and 2008 exhibit changes in lending patterns that are lower by between 13 and 42 percent than their non-crisis counterparts. This finding is robust to potential alternative explanations and also holds, though less strongly, for the 1997-98 Asian crisis.
    Keywords: Financial Crises & Economic Stabilization, Foreign bank ownership, Financial crisis, Bank lending
    Date: 2014–07
  19. By: Masamune Iwasawa (Graduate School of Economics, Kyoto University and Research Fellow of Japan Society for the Promotion of Science); Mitsuo Inada (Graduate School of Agriculture, Kyoto University, and Research Fellow of Japan Society for the Promotion of Science); Seiichi Fukui (Graduate School of Agriculture, Kyoto University)
    Abstract: This study explores the effects of remittances on child education that depend on three types of migration: parental, non-parental, and no migration. Measuring the effects of remittances is challenging and demands great caution because their theoretical positive impacts can be partly or fully offset by the adverse influences of family members’ migration. The magnitude of this negative impact, furthermore, depends significantly on migrant characteristics. Specifically, given that parents play an irreplaceable role in their children’s education, parental migration not only leads to a labor shortage in the household but also results in insufficient parental input. To overcome the difficulties of measuring the effects of remittances, we derive data from the Cambodian Socio-Economic Survey in 2009, which provides a sufficient sample size for the three self-selected migration types. Estimating each subsample enables us to disentangle the net impact of remittances from that of migration and measure the influence of remittances given the differences in migrant characteristics. Overall, the estimates suggest that the positive effects of remittances are partially canceled out for non-parental migration and completely eliminated when parental migration occurs.
    Keywords: Remittance; Migrant heterogeneity; Educational expenditure
    JEL: O15 I25 J13
    Date: 2014–08
  20. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: This 2013 Article IV Consultation highlights that the Republic of Korea has experienced impressive growth since the 1970s, enabling it to escape the middle-income trap. Policies should aim to tackle the weakness of domestic demand and counter forthcoming headwinds to potential growth. Korea is reaping the benefits of prudent macroeconomic management and financial moderation. The economy faces significant medium-term growth and inclusiveness challenges. Slow household income growth hinders stabilization in household debt and weighs on domestic demand, while services sector productivity is very low.
    Keywords: Article IV consultation reports;Economic growth;Demand;Fiscal policy;Fiscal reforms;Labor market reforms;Monetary policy;Financial sector;Economic indicators;Staff Reports;Press releases;Korea, Republic of;
    Date: 2014–04–17
  21. By: Jungsoo Park (Asian Development Bank Institute (ADBI)); Yung Chul Park
    Abstract: This study analyzes the effects of financial liberalization on the lending behavior of banks and non-bank financial institutions (NBFIs) before and after the 1997 Asian financial crisis, using panel regressions on Republic of Korea firm-level and industry-level data of the period 1991–2007. It also develops a financial liberalization index to incorporate the multifaceted nature of financial reform. Findings show that financial liberalization has led banks and NBFIs to allocate more of their loans to small and medium-sized firms with good performance histories, thereby helping these entities to improve their total factor productivity growth. This paper does not find similar effects of financial liberalization on efficiency at large firms or at the industry level. Heavier reliance on direct financing after the crisis has not improved the productivity of large firms.
    Keywords: Financial Liberalization, non-bank financial institutions, Lending Behavior, firm-level and industry-level data, Financial Reform, small and medium-sized firm, Total Factor Productivity Growth
    JEL: G20 O40
    Date: 2014–05
  22. By: Peter J. Morgan (Asian Development Bank Institute (ADBI)); Victor Pontines
    Abstract: Developing economies are seeking to promote financial inclusion, i.e., greater access to financial services for low-income households and firms, as part of their overall strategies for economic and financial development. This raises the question of whether financial stability and financial inclusion are, broadly speaking, substitutes or complements. In other words, does the move toward greater financial inclusion tend to increase or decrease financial stability? A number of studies have suggested both positive and negative ways in which financial inclusion could affect financial stability, but very few empirical studies have been made of their relationship. This partly reflects the scarcity and relative newness of data on financial inclusion. This study contributes to the literature on this subject by estimating the effects of various measures of financial inclusion (together with some control variables) on some measures of financial stability, including bank non-performing loans and bank Z-scores. We find some evidence that an increased share of lending to small and medium-sized enterprises (SMEs) aids financial stability, mainly by reducing non-performing loans (NPLs) and the probability of default by financial institutions. This suggests that policy measures to increase financial inclusion, at least by SMEs, would have the side-benefit of contributing to financial stability as well.
    Keywords: Financial Stability, financial inclusion, SMEs, low-income households, non-performing loans
    JEL: G21 G28 O16
    Date: 2014–07

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