nep-sea New Economics Papers
on South East Asia
Issue of 2015‒12‒20
25 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Policy initiatives and firms’ access to external finance: Evidence from a panel of emerging Asian economies By Bose, Udichibarna; MacDonald, Ronald; Tsoukas, Serafeim
  2. The Effect of Pre-School Education on Academic Achievement in Indonesia By Mohamad Fahmi; Putri Grace Ninibeth Jewelery
  3. Toward ASEAN Economic Community: Revitalising Indonesia’s Position in Financial and Customs Cooperation By Saputra, Wempi; Trilaksana, Ari Cahyo
  4. The Financial Systems of Financially Less Developed Asian Economies: Key Features and Reform Priorities By Batten, Aaron; Doung, Poullang; Enkhbold, Enerelt; Estrada, Gemma; Hansen, Jan; Luarsabishvili, George; Mortaza, Md. Golam; Park, Donghyun
  5. Bond Market Development in Developing Asia By Burger, John; Warnock, Francis; Warnock, Veronica Cacdac
  6. The Asian Currency Unit, Deviation Indicators, and Exchange Rate Coordination in East Asia: A Panel-Based Convergence Approach By Pontines, Victor; You, Kefei
  7. How Urbanization Affects CO2 Emissions in Malaysia? The Application of STIRPAT Model By Shahbaz, Muhammad; Loganathan, Nanthakumar; Muzaffar, Ahmed Taneem; Ahmed, Khalid; Jabran, Muhammad Ali
  8. Asia’s Reserve Accumulation: Part of a New Paradigm By Florian Brugger
  9. Financial Inclusion in Asia: An Overview By Ayyagari , Meghana; Beck, Thorsten
  10. Multiscale Adaptive Inference on Conditional Moment Inequalities By Timothy B. Armstrong; Hock Peng Chan
  11. Global Agrifood Value Chains and Local Poverty Reduction: What Happens to Those Who Don’t Plug In? By Chang, Han-Hsin; Di Caprio, Alisa; Sahara, Sahara
  12. The Selection of Trade Integration Indicators: Intraregional Share, Intensity, Homogeneous Intensity, and Introversion Index By Hamanaka, Shintaro
  13. Financial Integration in Asset and Liability Holdings in East Asia By Park, Donghyun; Shin, Kwanho
  14. Institutional Quality, Trade Openness, and Financial Development in Asia: An Empirical Investigation By Le, Thai-Ha; Kim, Jungsuk; Lee, Minsoo
  15. Enhancing Bank Supervision in Asia: Lessons Learned from the Financial Crisis By Zamorski, Michael; Lee, Minsoo
  16. A Portrait of Diversity In Indonesian Traditional Cuisine By Situngkir, Hokky; Maulana, Ardian; M. Dahlan, Rolan
  17. Unified Growth Theory Contradicted by the Economic Growth in Asia By Ron W Nielsen
  18. An Empirical Estimation of Asia's Untapped Regional Integration Potential Using Data Envelopment Analysis By Naeher, Dominik
  19. Financial Development, Financial Openness, and Economic Growth By Estrada, Gemma Esther; Park, Donghyun; Ramayandi, Arief
  20. Constructing a Bias-Free Trade Governance Indicator: Revealing the Biases of Existing Survey Indicators By Hamanaka, Shintaro; Tafgar, Aiken; Ico, Ronald
  21. The Noodle Bowl Effect: Stumbling or Building Block? By Kang, Jong Woo
  22. Why corporations in developing countries are likely to be even more susceptible to the vicissitudes of international finance than their counterparts in the developed world: A Tribute to Ajit Singh By José Gabriel Palma
  23. Economic Growth, Financial Development, and Income Inequality By Park, Donghyun; Shin, Kwanho
  24. Interrelation between Growth and Inequality By Kang, Jong Woo
  25. Financial regulatory transparency: new data and implications for EU policy By Mark Copelovitch; Christopher Gandrud; Mark Hallerberg

  1. By: Bose, Udichibarna; MacDonald, Ronald; Tsoukas, Serafeim
    Abstract: This paper analyses the impact of policy initiatives co-ordinated by Asian national governments on firms' composition of external finance. Using a unique firm-level database of eight Asian countries - Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand over the period of 1996-2012 and a difference-in-differences approach, the results show a significant impact of policy initiatives on firms' choice to external finance. We find that firms increased their uptake of long-term debt, while decreased their short-term debt. We also document that less risky and more profitable firms are more significantly affected by the policy change than riskier and less profitable firms. Finally, we show that the improved access to external finance after the policy initiative helped firms to raise their investment spending.
    Keywords: External finance; Emerging Asia; Bond market policy initiatives; Financial constraints
    Date: 2015
  2. By: Mohamad Fahmi (Department of Economics, Padjadjaran University); Putri Grace Ninibeth Jewelery (Department of Economics, Padjadjaran University)
    Abstract: This study analyzed the effect of Early Childhood Education on Academic Achievement in Indonesia. This study used kindergarten education and National Test Score of Indonesian Language and Math as the main subject of research. This study obtained the sample from Indonesian Family Life Survey (IFLS) 2007. The econometric method, that this study used, was Ordinary Least Square (OLS). This study presented the estimation based on school level, primary and secondary. This study founded that kindergarten education (formal Early Childhood Education) affected National Test Score of Indonesian Language and Math significantly if other factors did not add in the regression. This finding caused the effect of kindergarten education to National Test Score became not valid or biased. The problems like high cost of early childhood education and lack of teacher could be the reason why the effect of early childhood education was not maximal. This problems can be the the next subject of research about early childhood education.
    Keywords: Early Childhood Education, Academic Achievement, Indonesia, IFLS
    JEL: I21 O15
    Date: 2015–12
  3. By: Saputra, Wempi; Trilaksana, Ari Cahyo
    Abstract: This paper is meant to provide a simple current line of discourse on Indonesian position in The ASEAN Economic Community (AEC) focusing in the financial and customs cooperation. AEC is the target of ASEAN economic integration 2015. In regards of favorable precondition: the market of 600 million populations, stable economic growth and relatively high investment level, in the long run AEC most likely will benefit every ASEAN members. The analysis tried to describe and develop issues correlations between financial cooperation: capital market development, liberalization of capital account, liberalization of financial service, ASEAN+3 bond m arket initiative, ASEAN+3 research group; and customs integration issues: Implementation of Strategic Plan of Customs Development (SPCD). There are two conclusions from the analysis. First, in the overall AEC scorecard, Indonesian position is in par with Lao PDR and Cambodia but far behind other members (April 2013 position), while in the context of financial cooperation, Indonesian position is far above BCLMV, competing with Thailand and Philippines but still behind Malaysia and Singapore (ASEAN Cooperation). These facts fortify the urgency of accelerating the implementation of AEC initiatives and reassessing Indonesian position in ASEAN financial cooperation and ASEAN+3. Further, over SPCD 15 strategies as the instruments for customs integration, the paper wrapped up the importance of customs administration capacity building, mainly focused on improving customs procedure, customs valuation rules, rules of origin, and customs modernization. The paper will further articulated the issue recommendations on steps and caveat for policy formulation and harmonization both at national and regional level.
    Keywords: Asean Economic Community, Fiscal Policy, Customs Cooperation, Financial Cooperation
    JEL: F15 F36 F4
    Date: 2013–06–01
  4. By: Batten, Aaron (Asian Development Bank); Doung, Poullang (Asian Development Bank); Enkhbold, Enerelt (Asian Development Bank); Estrada, Gemma (Asian Development Bank); Hansen, Jan (Asian Development Bank); Luarsabishvili, George (Asian Development Bank); Mortaza, Md. Golam (Asian Development Bank); Park, Donghyun (Asian Development Bank)
    Abstract: Developing Asia’s financial depth as a whole compares favorably with other parts of the developing world, but there are wide variations across subregions and economies. This paper examines the key features and reform priorities of the financial systems in Bangladesh, Cambodia, Georgia, Mongolia, and Papua New Guinea. All are low-income and lower-middle-income economies that have relatively underdeveloped systems heavily dominated by banks and with low levels of access, especially for the poor. The urgent priority for bank-dominated economies is creating a more competitive environment that mobilizes domestic savings, lowers the cost of capital, improves access, and channels credit to the most productive sectors. Reforming state owned or state-linked banks can also yield sizable efficiency gains. A common need in all five is good governance in financial institutions and markets. Financial regulators in these countries face a difficult trade-off between promoting economic growth and safeguarding financial stability.
    Keywords: financial development; financial system; low-income economies; lower-middle-income economies
    JEL: G20 G28
    Date: 2015–09–09
  5. By: Burger, John (Loyola University Maryland); Warnock, Francis (Darden School of Business); Warnock, Veronica Cacdac (Darden School of Business)
    Abstract: We describe and assess two dimensions of the current state of bond market development in developing Asia: the role of bond markets in overall financial systems and a comparison of the salient features of bond market development in developing Asia and other regions. We highlight key drivers and constraints of bond market development in developing Asia, particularly in smaller economies, as well as key implications for policymakers, especially for promoting bond market development in the region. Our analysis suggests that high inflation volatility presents a serious obstacle to bond market development. We find that smaller developing Asian economies could enable bond market development by pursuing creditor friendly policies and strengthening the legal rights of borrowers.
    Keywords: bond market; financial development; financial system
    JEL: F30 G10 G15
    Date: 2015–09–01
  6. By: Pontines, Victor (Asian Development Bank Institute); You, Kefei (Asian Development Bank Institute)
    Abstract: Employing the panel convergence method of Phillips and Sul (2007) to the nominal deviation indicators of two recent unofficial constructions of the Asian Currency Unit (ACU) index, this paper examines the existence and extent of convergence in the movements of East Asian currencies against the ACU. Empirical results reveal that intra-East Asian exchange rate movements have not converged to form a cohesive, unified bloc where currencies share homogenous movements, regardless of whether one examines the data on intra-East Asian exchange rate movements before or after the collapse of Lehman Brothers in September 2008. Instead, a separate number of convergent clubs or blocs in the region have formed in recent years. Finally, and most importantly, economies in the region are, generally, converging at different speeds to two opposing poles of convergence: groups of relatively depreciating currencies, and groups of relatively appreciating currencies.
    Keywords: Asian Currency Unit; exchange rate movements; currency blocs
    JEL: C33 F31 F36
    Date: 2015–12–08
  7. By: Shahbaz, Muhammad; Loganathan, Nanthakumar; Muzaffar, Ahmed Taneem; Ahmed, Khalid; Jabran, Muhammad Ali
    Abstract: We investigate the impact of urbanisation on CO2 emissions by applying the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) in the case of Malaysia over the period of 1970Q1-2011Q4. Empirically, after testing the integrating properties of the variables using unit root test, we applied the Bayer-Hanck combined cointegration approach to examine the cointegration relationship between the variables. Further, we tested the robustness of long-run relationship in the presence of structural breaks using ARDL bounds testing approach. The causal relationship between the variables is investigated by applying the VECM Granger causality test. Our results validate the existence of cointegration in the presence of structural breaks. The empirical results exposed that economic growth is a major contributor to CO2 emissions. Besides, energy consumption raises emissions intensity and capital stock boosts energy consumption. Trade openness leads affluence and hence increases CO2 emissions. More importantly, we find that the relationship between urbanisation and CO2 emissions is U-shaped i.e. urbanisation initially reduces CO2 emissions, but after a threshold level, it increases CO2 emissions. The causality analysis suggests that the urbanization Granger causes CO2 emissions.
    Keywords: Urbanisation, Energy, Malaysia
    JEL: C01
    Date: 2015–12–04
  8. By: Florian Brugger (Department of Sociology, Karl-Franzens-University Graz)
    Abstract: So far, various contributions have failed to explain Asia’s fat foreign currency reserve accumulation. In this paper, I analyze reserve holding decisions in a wider social, political, and economic context. Using Weber’s heuristic of ideas and interests as determinants of actions, I show that Asian countries' reserve accumulation is caused by a paradigm shift. In Asia’s former Development State paradigm, accumulation of huge reserves was not of central importance because of closed and heavily regulated financial markets. After the Development State paradigm had collapsed in the 1980s, a new paradigm was built around the ideas of liberalism, the unconditional avoidance of any further financial crisis, and high employment. In order to harmonize the requests of liberal politics and open financial markets in addition to ‘full’ employment driven by export-led growth and the avoidance of further crises, hoarding reserves was a suitable strategy.
    Date: 2015–12–09
  9. By: Ayyagari , Meghana (George Washington University); Beck, Thorsten (Cass Business School)
    Abstract: This paper provides an analysis of financial development and inclusion in developing Asia using data from a wide array of sources. We show that in terms of aggregate measures of financial development, the region as a whole has superior banking sector depth compared to other developing regions; however, this masks a great deal of variation across Asian economies. Furthermore, in terms of financial inclusion, fewer than 27% of adults in developing Asia have an account in a formal financial institution, and only 33% of enterprises report having a line of credit or a loan from a financial institution. Cost, geographic access, and lack of identification are the most commonly reported barriers to financial inclusion that can be addressed by policy makers.
    Keywords: financial development; financial inclusion; financial system
    JEL: D14 G20 G21 G30
    Date: 2015–09–07
  10. By: Timothy B. Armstrong (Cowles Foundation, Yale University); Hock Peng Chan (National University of Singapore)
    Abstract: This paper considers inference for conditional moment inequality models using a multiscale statistic. We derive the asymptotic distribution of this test statistic and use the result to propose feasible critical values that have a simple analytic formula, and to prove the asymptotic validity of a modified bootstrap procedure. The asymptotic distribution is extreme value, and the proof uses new techniques to overcome several technical obstacles. The test detects local alternatives that approach the identified set at the best rate among available tests in a broad class of models, and is adaptive to the smoothness properties of the data generating process. Our results also have implications for the use of moment selection procedures in this setting. We provide a monte carlo study and an empirical illustration to inference in a regression model with endogenously censored and missing data.
    Keywords: Moment inequalities, Set inference, Adaptive inference
    JEL: C01 C14 C34
    Date: 2013–01
  11. By: Chang, Han-Hsin (Consultant at the former Office of Regional Economic Integration, ADB); Di Caprio, Alisa (Asian Development Bank); Sahara, Sahara (Bogor Agricultural University)
    Abstract: Structural changes in the global agrifood value chain have transformed food production in developing countries including Indonesia. One element of this is the spread of supermarket retailing. By increasing the demand for and returns to higher quality produce, this development has the potential to improve living standards in a sector where poverty has been persistent. Many studies have shown the magnitude of price premiums available to farmers who sell to supermarkets. However, little attention has been paid to how the introduction of a supermarket retailer affects those farmers who continue to sell to traditional market channels. Our data suggests that in regions where there are both modern and traditional buyers, competition effects result in the immiserization of farmers who continue to sell to traditional markets. This result underlines the fact that while sectorial transformation has desirable poverty reduction potential, actual impacts are lumpy. The distribution of farmer participation in a region may result in a case where the upgrading of agrifood supply chains can increase poverty in the absence of policy interventions.
    Keywords: agrifood value chain; Indonesia; quality price premium; small farmers; supermarket
    JEL: O13 Q13
    Date: 2015–09–29
  12. By: Hamanaka, Shintaro (Asian Development Bank)
    Abstract: This paper attempts to provide a clear and comprehensive picture of trade integration in Asia, using a trade linkage diagram. The paper reviews four types of indicators (share, intensity, homogeneous intensity, and introversion index) and argues that the introversion index is the most suitable indicator for the comparison of the level of trade integration, both in terms of cross-regional comparisons and time series analyses. Next, since Asia is a group of heterogeneous economies and the level of integration across subregions is not consistent, the paper includes a subregional analysis of trade integration in Asia. The analysis includes the (i) regional introversion of each subregion, (ii) intersubregional trade linkage, and (iii) extraregional trade linkage of each subregion. The subregional trade linkage diagram based on the introversion index provides us with a snapshot of trade integration, which is useful for both scholars and policy makers. At a glance, we can understand who trades more than others, and with whom.
    Keywords: intraregional trade share; introversion index; subregions; trade integration; trade linkage diagram
    JEL: F14 F15
    Date: 2015–10–05
  13. By: Park, Donghyun (Asian Development Bank); Shin, Kwanho (Korea University)
    Abstract: In this paper, we examine the evolution of intra-East Asian financial integration from 2001 to 2013. Most existing studies on this topic look primarily at asset holdings; we examine liability holdings as well. Using the International Monetary Fund’s Coordinated Portfolio Investment Survey data for equities, long-term debt, and short-term debt, our analysis generally supports the conventional wisdom that East Asian countries are more financially integrated with global financial centers than they are with each other. This is true for both asset holdings and liabilities and is confirmed by an econometric analysis based on financial gravity equations. However, the gap between global integration and regional integration has narrowed for asset holdings over time but not for liability holdings. The results of additional econometric analysis indicate that the diversification of liability holdings can mitigate financial instability due to global financial shocks. More precisely, diversification was associated with smaller exchange rate depreciation during the quantitative easing taper tantrum of 2013. These results point to a possible benefit from strengthening regional financial integration. Deeper regional integration would reduce dependence on global financial markets for funding and hence vulnerability to global shocks.
    Keywords: East Asia; exchange rate depreciation; financial integration; financial stability; global integration; QE tapering; regional integration
    JEL: F32 F44 G01
    Date: 2015–08–20
  14. By: Le, Thai-Ha (RMIT University); Kim, Jungsuk (Sogang University); Lee, Minsoo (Asian Development Bank)
    Abstract: We examine the determinants of financial development in Asia and the Pacific from 1995 to 2011. To do so, we apply the dynamic generalized method of moments to a panel data set of 26 economies in the region. We find that better governance and institutional quality foster financial development in developing economies while economic growth and trade openness are key determinants of financial depth in developed economies.
    Keywords: Asia and the Pacific; economic growth; financial development; governance and institutional quality; panel data analysis; trade openness
    JEL: G10 G20
    Date: 2015–09–15
  15. By: Zamorski, Michael (South East Asian Central Banks); Lee, Minsoo (Asian Development Bank)
    Abstract: The global financial crisis underlined that sound and effective bank regulation is vital to financial stability. Assessments of the global financial crisis invariably point to ineffective finance regulation and supervision as the main reasons for the onset of the crisis and its severity. In particular, lapses in banking regulation contributed significantly to the outbreak. The crisis reflected the failure of regulatory authorities to keep pace with financial innovation. Bank supervision had been weak by any measure. Supervisors did not conduct regular onsite bank inspections or examinations of sufficient depth. They did not properly implement risk-based supervision, and they failed to identify shortcomings in banks’ risk-management methods, governance structures, and risk cultures. Meanwhile, offsite surveillance systems rely too heavily on banks’ self-reported data to effectively monitor risk. Banking regulation is the primary safeguard against financial instability, but it should be supplemented by macroprudential policies and other new policy instruments now available to regulatory authorities.
    Keywords: Basel Committee’s core principles; finance regulation and supervision; global financial crisis; macroprudential policy
    JEL: G01 G18 G21 G28
    Date: 2015–08–12
  16. By: Situngkir, Hokky; Maulana, Ardian; M. Dahlan, Rolan
    Abstract: The archipelagic geography and demography of Indonesian people due to the way people serve food and drinks on the table is analyzed. Statistically some properties about the food recipes are observed, while the analysis is followed by the methodology to see the clustering of the food and beverage due to their ingredients. The global mapping of all the food yields four classes of the food that is related to the way people conventionally prepare the cuisines, whether the recipes are on vegetables, fish and seafood, chicken and poultry, and meats. It is obvious that ingredient wise, the diversity of the food is emerged from traditional ways adding spices and herbs. For more insights, the analysis for food dressings and traditional drinks are also delivered. While the mappings exhibit the classes of food and beverages based on the purposes and styles of the service in the cuisines, some signatures of regional localities are also detected.
    Keywords: food, culinary, diversities, clustered map, memetics, phylomemetic tree, hierarchical clustered tree
    JEL: C1 C6 C63 C8 C88 I0 I39 Q0 Q01 Q18 Q57 Y1 Z1
    Date: 2015–11–10
  17. By: Ron W Nielsen
    Abstract: Historical economic growth in Asia (excluding Japan) is analysed. It is shown that Unified Growth Theory is contradicted by the data, which were used (but not analysed) during the formulation of this theory. Unified Growth Theory does not explain the mechanism of economic growth. It explains the mechanism of Malthusian stagnation, which did not exist and it explains the mechanism of the transition from stagnation to growth that did not happen. The data show that the economic growth in Asia was never stagnant but hyperbolic. Industrial Revolution did not boost the economic growth in Asia. However, the theory contains also a dangerous and strongly-misleading concept that after a long epoch of stagnation we have now entered the epoch of sustained economic growth, the concept creating the sense of security. The opposite is true. After the epoch of sustained and secure economic growth we have now entered the epoch of a fast-increasing and insecure economic growth.
    Date: 2015–12
  18. By: Naeher, Dominik (Goethe University Frankfurt)
    Abstract: This paper uses directed bilateral flow data on multiple dimensions of economic integration to construct a composite index of regional integration outcomes covering 19 regions in various parts of the world. As a first step, the multidimensional indicator is used to rank regions according to their current degree of regional integration, which allows for a direct comparison of Asia’s regional integration performance with those of other regions of the world. As a second step, the constructed indicator of regional integration outcomes is used as the output variable in a data envelopment analysis (DEA) to estimate Asia’s untapped regional integration potential.
    Keywords: Asia; composite index; data envelopment analysis; integration potential; regional integration
    JEL: F02 F10 F13 F15
    Date: 2015–08–21
  19. By: Estrada, Gemma Esther (Asian Development Bank); Park, Donghyun (Asian Development Bank); Ramayandi, Arief (Asian Development Bank)
    Abstract: A sound and efficient financial system is an indispensable ingredient of economic growth. It consists primarily of banks and capital markets, which channel savings into investments and other productive activities that contribute to economic growth and augment the economy’s productive capacity. This paper explains the importance of financial development and openness. It sifts through the literature on the relationship between both variables and economic growth. It then reports the results and discusses some original empirical analysis. In addition to using more updated data, which extend the sample period to include some postcrisis years, the analysis examines whether country characteristics and factors such as the exchange rate regime affect the finance–growth nexus.
    Keywords: economic growth; exchange rate regime; financial development; financial openness
    JEL: C33 E44 F31 G20
    Date: 2015–08–12
  20. By: Hamanaka, Shintaro (Asian Development Bank); Tafgar, Aiken (Consultant at the former Office of Regional Economic Integration, ADB); Ico, Ronald (Consultant at the former Office of Regional Economic Integration, ADB)
    Abstract: Governance is one of the key factors that shape the economic performance of an economy in terms of economic and trade growth. However, accurately measuring the quality of governance is not an easy task. Research typically uses governance indicators from surveys, which may have biases and inherent errors. In this paper, we attempt to construct an alternative governance indicator, which is free from perception and subjective biases. Our exercise is based on the inference that economies with good trade governance can compile high quality trade statistics; the latter being a close proxy for the former. This study comes up with a global ranking of the quality of (trade) governance. The paper also compares our bias-free indicator against existing survey governance indicators.
    Keywords: bias; corruption; governance; indicators; perception; survey; trade
    JEL: F14 F15
    Date: 2015–09–29
  21. By: Kang, Jong Woo (Asian Development Bank)
    Abstract: Although it is well-known that a global trade regime best ensures economic welfare, there has nevertheless been a proliferation of free trade agreements (FTAs) between individual countries. This poses the challenge known as the “noodle bowl effect”—stemming from different rules of origins and technical standards. In this paper, we explore an economy’s incentive for entering an FTA rather than anticipating a global trade regime. Using basic game theories, we show that in order for an equilibrium number of FTA participants to be obtained, the negative impact of FTAs should be significant. Globally, the side effects of FTAs centered on noodle bowl effects could contribute to inducing a global free trade regime—and also increase the viability of such regime once established. Ironically, then we need to encourage more FTAs across countries to facilitate the spread of greater noodle bowl effects instead of trying to curb the rush to FTAs to promote a global trade regime.
    Keywords: FTA game; global trade regime; noodle bowl effect
    JEL: C70 F10 F13
    Date: 2015–08–21
  22. By: José Gabriel Palma
    Abstract: This paper seeks to explore the nature of ‘Good’ Energy Policy by offering a multi-disciplinary social science and humanities perspective on policy making. The objective in doing this is to understand how to get from where we are today to a ‘better’ energy policy. We begin by discussing what we mean by ‘policy’. We then go on to characterise and challenge the technologists’ approach to energy policy. Next we discuss some key intellectual starting points that explain why policy making in this area is so difficult. We then turn to a set of multi-disciplinary social science and humanities perspectives on energy policy that together form promising areas for research. These are: perception; quantification; well-being; public trust; role of the state; competence and hubris in delivery; and parallels with healthcare. We close by discussing how these perspectives can illuminate whether a policy is ‘good’, ‘bad’ or something in between.
    Keywords: Ajit Singh; Causes of financial crisis; Corporate finance; East Asia; Financial liberalisation; Ideology; Keynes; Kindleberger; Latin America; Neo-liberal economic reforms; QE; and Systemic market failure
    JEL: B5 D3 D43 E2 E43 F3 G1 G3 G21 G23 L52 N5 N16
    Date: 2015–12–08
  23. By: Park, Donghyun (Asian Development Bank); Shin, Kwanho (Korea University)
    Abstract: The central objective of our paper is to empirically examine the relationship between financial development and income inequality. Theoretically, there are grounds for both a positive and negative relationship between the two variables. Our main finding is that financial development contributes to reducing inequality up to a point, but as financial development proceeds further, it contributes to greater inequality. We also find that when the ratio of primary schooling to total schooling increases and law and order improves, financial development becomes more effective in reducing inequality.
    Keywords: financial development; growth; income inequality
    JEL: D63 G01 O11 O40
    Date: 2015–08–05
  24. By: Kang, Jong Woo (Asian Development Bank)
    Abstract: Inclusive growth should ensure “broad-based” economic growth which characterizes the pattern of growth. Beyond simple association identification implied by the Kuznets curve and cross-country panel regression analyses, this study attempts to shed light on the dynamic causality relationship and impact channel between economic growth and inequality—using vector error correction model (VECM) and vector autoregression (VAR) models for individual economies. If growth has a negative impact on inequality, renewed attention should be paid to curbing inequality. Those economies experiencing inclusive growth can further promote growth with less risk of sacrificing equity. This also provides useful implications for development interventions through designing and monitoring projects and programs. Given the growing challenges of reducing inequality, economies could create a proper inequality target as a binding constraint in pursuing economic growth, instead of using a growth–first and redistribution–later strategy.
    Keywords: dynamic causality; economic growth; inequality
    JEL: C32 O10 O40
    Date: 2015–08–28
  25. By: Mark Copelovitch; Christopher Gandrud; Mark Hallerberg
    Abstract: Highlights International financial institutions have promoted financial regulatory transparency, or the publication by supervisors of financial industry data. Financial regulatory transparency enhances market stability and increases democratic legitimacy. We introduce a new index of financial regulatory data transparency - the FRT Index. It measures how countries report to international financial institutions basic macro-prudential data about their financial systems. The Index covers 68 high-income and emerging-market economies over 22 years (1990-2011). We find a number of striking trends over this period. European Union members are generally more opaque than other high-income countries. This finding is especially relevant given efforts to create an EU capital markets union. Globally, financial regulatory data transparency has increased. However, there is considerable variation. Some countries have become significantly more transparent, while others have become much more opaque. Reporting tends to decline during financial crises. We propose that the EU institutions take on a greater role in coordinating and possibly enforcing reporting of bank and non-bank institution data. Similar to the United States, a reporting requirement should be part of any EU general deposit insurance scheme. Financial regulatory transparency refers to the availability of financial industry data made public by supervisors. It has been lauded as a measure to enhance market stability (Arnone et al, 2007) and democratic legitimacy (Gandrud and Hallerberg, 2015). As with fiscal transparency, which concerns the availability of public sector financial data, and monetary policy transparency, which concerns the data monetary policymakers use to set interest rates, international financial institutions have promoted regulatory transparency. Following the East Asian crisis of the late 1990s, the International Monetary Fund (IMF) included transparency in its 1999 Code of Good Practices on Transparency in Monetary and Financial Policies1 and introduced data dissemination standards for making financial data available beginning in 19962. Similar to its measures to promote fiscal transparency, the IMF has established a Financial Sector Assessment Program (FSAP), under which it conducts voluntary reviews of the stability of financial sectors and the development of those sectors. ‘Transparency’ is one key consideration within this programme. While it is up to the country in question to approve publication of the IMF’s FSAP review, most are publicly available online, and they usually include a review of the extent to which a given country observes the Fund’s standards and codes3. The Basel Committee for Banking Supervision added regulatory transparency to its Core Principles for Effective Banking Supervision in 2006. Within the European Union, the European Banking Authority (EBA) has made a number of recent attempts to promote regulatory transparency, as have other EU financial sector institutions such as the the European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA). We discuss these initiatives in more detail below, but there is currently no measure of transparency that is broadly comparable across countries or that captures whether supervisors make public macro-prudential data. In order to address this gap in measuring regulatory transparency, we introduce a new international financial regulatory data transparency index. We call it the Financial Regulatory Transparency (FRT) Index. The FRT Index measures whether countries report core macro-prudential data about their financial systems to international financial institutions like the IMF and World Bank. The Index currently covers 68 high-income and emerging market economies over 22 years (1990-2011). The FRT Index is freely available for download at - https -// Why regulatory transparency is important Regulatory transparency is important in the context of several ongoing political debates. Regulatory transparency is connected to greater liberalisation of financial markets in other parts of the world, and it can strengthen a capital markets union by making the financial sector more efficient. Gelos and Wei (2005) find that international investors invest less and capital flight is greater during crises in opaque countries. Copelovitch et al (2015) find that countries with greater regulatory transparency pay lower rates of interest on their sovereign bonds when debt burdens increase. The logic for this finding is straightforward - investors have a better understanding of what is going on in a country’s banking sector when regulatory transparency is high, and they are less nervous about implicit liabilities to the government accounts from the financial sector, liabilities which typically go unreported in government budgets (see Irwin, 2015). Despite the significant benefits of regulatory transparency – including enhancing the efficiency of financial markets and reducing sovereign borrowing costs – the so-called Five Presidents’ Report on Completing Europe's Economic and Monetary Union (Juncker, 2015), in which the presidents of the EU institutions suggest a way forward for the euro area, is curiously silent on the need for transparency in the section ‘Towards a Financial Union’.
    Date: 2015–12

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