nep-sea New Economics Papers
on South East Asia
Issue of 2017‒12‒11
nineteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Economic Complexity and Quality of Life in Latin America and Asia between 2010 and 2014 By Ferraz, Diogo; Moralles, Herick Fernando; Campoli, Jéssica; do Nascimento Rebelatto, Daisy Aparecida
  2. Non-core liabilities and monetary policy transmission in Indonesia during the post-2007 global financial crisis By Victor Pontines; Reza Y. Siregar
  3. Analysing the Macroeconomic Drivers of Stock Market Development in the Philippines By Ho, Sin-Yu; Odhiambo, Nicholas
  4. Electrical and electronics manufacturing in Thailand exploring challenges and good practices in the workplace By Errighi, Lorenza.; Bodwell, Charles.
  5. Philippine Inequality across the Twentieth Century: Slim Evidence but Fat Questions By Williamson, Jeffrey G
  6. The impact of mega-ships: The case of Jakarta By ITF
  7. Sunk Cost Fallacy in Driving the World's Costliest Cars By Ho, Teck Hua; Png, Ivan P. L.; Reza, Sadat
  8. Fair Share? international recruitment in the Philippines By Zhou, Mi.
  9. Cambodia; 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cambodia By International Monetary Fund
  10. What is driving the corporate bond market development in Asia? By Oskar Kowalewksi; Pawel Pisany
  11. Vulnerability from trade in Vietnam By Emiliano Magrini; Pierluigi Montalbano; L. Alan Winters
  12. Random Coefficient Continuous Systems: Testing for Extreme Sample Path Behaviour By Tao, Yubo; Phillips, Peter C.B.; Yu, Jun
  13. Regional financial integration in ASEAN in the comparative perspective By Vinokurov, Evgeny
  14. Are politically connected firms less constrained in credit markets? By John Rand
  15. Federated States of Micronesia; 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Federated States of Micronesia By International Monetary Fund
  16. ASEAN in transformation textiles, clothing and footwear: refashioning the future By Chang, Jae-Hee.; Rynhart, Gary.; Huynh, Phu.
  17. Economic Crises and Globalisation as Drivers of Pension Privatisation: an Empirical Analysis By Markus Leibrecht; Joelle H. Fiong;
  18. Party System Change and the Quality of Democracy in East Africa By Riccardo Pelizzo; Zim Nwokora
  19. Financial Crises and the Composition of Public Finances: Evidence from OECD Countries By Markus Leibrecht; Johann Scharler;

  1. By: Ferraz, Diogo; Moralles, Herick Fernando; Campoli, Jéssica; do Nascimento Rebelatto, Daisy Aparecida
    Abstract: The objective of this article is to measure the efficiency of the Latin American and Asian countries in converting economic complexity into quality of life between 2010 and 2014. The method used was Data Envelopment Analysis (DEA). The results showed in 2014, all Asian countries were efficient except China and the Philippines. Cuba was the country that most served as benchmark for inefficient countries. The window analysis showed only Japan, South Korea and Singapore remained effective over time.
    Keywords: Economic Complexity,Human Development,Data Envelopment Analysis,Latin America,Asia
    JEL: O4 O3
    Date: 2017
  2. By: Victor Pontines; Reza Y. Siregar
    Abstract: The policy importance of non-core liabilities has risen to prominence in recent years with the studies of Shin and Shin (2010), Hahm, et al., (2010) and Hahm, et al., (2013) highlighting it as a useful indicator of financial procyclicality and vulnerability. In this paper, we look at non-core liabilities in relation to its role in the transmission of monetary policy, particularly by examining how the interest rate channel of monetary policy is affected by non-deposit liabilities. We analyse this issue in the context of an emerging economy experience of Indonesia, which in recent years, has seen an increased reliance of its banking sector on non-core funding. Our investigation employs available bank-level data on non-core liabilities and lending rates in Indonesia over the period October 2011 to July 2016. We find that including non-core liabilities in the estimation has an effect, relative to the baseline, of stronger overall and immediate pass-through, albeit with a more sluggish adjustment towards correction of disequilibrium in the next period. The overall effect is that non-core liabilities make the duration lengthier for the monetary policy rate to transmit to bank lending rates in Indonesia.
    Keywords: non-core liabilities, lending rates, policy rates, interest rate channel, monetary policy transmission, dynamic panel
    JEL: C33 E43 E52 G21
    Date: 2017–12
  3. By: Ho, Sin-Yu; Odhiambo, Nicholas
    Abstract: This paper analyses the macroeconomic drivers of stock market development in the Philippines during the period 2001Q4 to 2016Q4. In particular, the paper examines the impact of banking sector development, inflation rate, exchange rate, economic growth, trade openness, and stock market liquidity on the development of the Philippine stock market. Theoretical and empirical literature reveals diverse views on the relationship between each determinant and stock market development. In addition, the Philippine stock market has experienced remarkable growth in recent decades. However, there is no similar study on this country in the literature. The paper, therefore, enriches the literature by investigating the macroeconomic drivers of stock market development in the Philippines using ARDL bounds testing procedure. The results show that, trade openness has had a negative impact on Philippine stock market development in the long run, whereas the banking sector development and exchange rate have had positive impacts on the development of the Philippine stock market in the short run.
    Keywords: macroeconomic drivers; stock market development; the Philippines; ARDL bounds testing
    Date: 2017–11
  4. By: Errighi, Lorenza.; Bodwell, Charles.
    Abstract: The electronics and electrical (E&E) industry, strongly supported by international trade and investment, has been an important export revenue and employment contributor to the Thai economy over the last three decades. However, as the country develops and more cost-competitive regional neighbours emerge, the Thai E&E industry faces upgrading challenges related to skilled labour gaps. This paper serves as an entry point to explore decent work challenges in Thailand’s E&E Industry. It is based on a desk review of employment-related challenges found at both industry and national level, complemented by good practice examples.
    Keywords: electronics industry, electrical industry, good practices, decent work, Thailand
    Date: 2017
  5. By: Williamson, Jeffrey G
    Abstract: In spite of persistent debates about income inequality and pro-poor policy in the Philippines, its history over the past century has been ignored, at least by economists. This is surprising given that the Philippines already had its first Census in 1903, long before its neighbors, augmented by other relevant evidence embedded in official documents generated by the American insular government. It is also surprising given that we know that income distributions change only very slowly and must be examined over the long run to identify its drivers. This essay reviews the (thin) historical evidence and proposes explanations. There is no Kuznets Curve, and no Marxian, Pikettian or other grand endogenous inequality theory at work, but there are dramatic episodes of change. It appears that there was an inequality rise up to World War 1, a fall between the World Wars, a rise to high levels by the 1950s, and an almost certain rise up to the end of the century which, due to mismeasurement, looks instead like stasis . We need to collect better evidence to confirm these narratives and to assess competing hypotheses.
    Keywords: inequality; the Philippines; twentieth century
    JEL: D30 N15 N35 O15 O53
    Date: 2017–12
  6. By: ITF
    Abstract: The port of Jakarta is the incontestable gateway to Indonesia. As an archipelago state, Indonesia has much to gain from improving its maritime connectivity and attracting more direct liner services. These services rely on ever larger ships. What is needed to attract them, and how could Jakarta best handle them? This report brings more clarity to these issues by assessing the impacts of very large container ships for Jakarta. It analyses current policies and offers recommendations on how Indonesia’s largest port could effectively prepare for the arrival of ships. This report is part of the International Transport Forum’s Case-Specific Policy Analysis series. These are topical studies on specific issues carried out by the ITF in agreement with local institutions. The port of Jakarta is the incontestable gateway to Indonesia. As an archipelago state, Indonesia has much to gain from improving its maritime connectivity and attracting more direct liner services. These services rely on ever larger ships. What is needed to attract them, and how could Jakarta best handle them? This report brings more clarity to these issues by assessing the impacts of very large container ships for Jakarta. It analyses current policies and offers recommendations on how Indonesia’s largest port could effectively prepare for the arrival of ships. This report is part of the International Transport Forum’s Case-Specific Policy Analysis series. These are topical studies on specific issues carried out by the ITF in agreement with local institutions.
    Date: 2017–12–08
  7. By: Ho, Teck Hua; Png, Ivan P. L.; Reza, Sadat
    Abstract: We develop a behavioral model of durable good usage with mental accounting for sunk costs. It predicts higher-than-rational usage that attenuates at a rate that increases with sunk costs. Singapore government policy varied the sunk cost of buying a new car. Using Singapore data, we estimate the elasticity of driving with respect to sunk costs to be 0.048, which implies that government policy between 2009 and 2013 was associated with 86 kilometers per month, or 5.6%, more driving. The results are robust to specifying sunk costs as relative to buyer income and estimation with Hong Kong data. We believe this to be the first field evidence of the sunk cost fallacy in usage of a major durable good.
    Keywords: sunk costs, mental accounting, behavioral economics, durable goods, consumer choice
    JEL: D4
    Date: 2017–03–02
  8. By: Zhou, Mi.
    Abstract: This working paper identifies the good practices applied by those private employment agencies that adopt fair recruitment principles for prospective migrant workers. It also describes the challenges that such recruiters face, including the bottlenecks and gaps in the legislative and regulatory frameworks that stand in the way of agencies committed to fair principles. The paper considers the commercial and practical challenges that confront fair labour recruiters, and identifies opportunities to help them to thrive in a highly competitive market. It examines how fair recruitment practices can be promoted in areas such as Mindanao, where deceptive and abusive recruitment practices are currently most prevalent. Finally, it identifies specific migration corridors in which fair recruitment practices could become the norm.
    Keywords: descriptor 1, descriptor 2, descriptor 3, descriptor 4
    Date: 2017
  9. By: International Monetary Fund
    Abstract: Cambodia continues to grow at an impressive pace. Looking ahead, the outlook is positive, although there are near-term downside risks. Financial sector vulnerabilities stemming from rapid financial deepening remain elevated despite a recent slowdown in credit growth. Revenue performance has been strong, but spending pressures are contributing to larger fiscal deficits. Medium-term prospects are favorable, though important challenges remain.
    Date: 2017–10–20
  10. By: Oskar Kowalewksi (IESEG School of Management (LEM-CNRS-UMR 9221)); Pawel Pisany (Institute of Economics of the Polish Academy of Science, Collegium of World Economy, Warsaw School of Economics, Poland)
    Abstract: We investigate the development of corporate bond markets in 10 Asian countries from 1995 to 2014. Using panel data on the market size and total issue of bonds by financial and non-financial companies, we confirm that macroeconomic and institutional factors are related to the depth of the market. In addition, we show that the issuance of bonds is also determined by other factors that strongly depend on the issuer type. We show that creditor rights and institutional quality are important in explaining the issuance of bonds by financial institutions. Furthermore, we determine a strong positive association between the level of domestic credit and the market and issue size of corporate bonds. In our opinion, the results indicate that there is a positive relationship between the development of the corporate bond market and the banking sector. These findings indicate that increased demand for bank loans induced the issuance of bonds by financial institutions which, in turn, may have led to the development of corporate bond markets in Asia.
    Keywords: corporate bond market, bond issuance, crisis, banking sector, Asia
    JEL: F36 O16 G15
    Date: 2017–05
  11. By: Emiliano Magrini (Food and Agriculture Organization, Rome); Pierluigi Montalbano (Department of Economics, University of Sussex; Department of Economics and Social Sciences, Sapienza University of Rome); L. Alan Winters (Department of Economics, University of Sussex)
    Abstract: This paper assesses vulnerability from trade in Vietnam by presenting an extended version of Ligon and Schechter’s (2003) Vulnerability as low Expected Utility (VEU) measure. It uses the VHLSS panel data covering the period 2002-06. The empirical results show that risk-induced vulnerability and heterogeneity in trade exposure matters in determining household overall vulnerability and that this is not linked to the actual manifestation of shocks. Although it does not represent, by any means, an argument against free trade, this work is relevant for policymaking since it contributes to deepen our knowledge on the subtle links between trade openness and vulnerability providing some insight on the stabilisation needs of trade reforms. These include protecting vulnerable farmers from excessive price volatility, as well as fostering their risk management strategies.
    Keywords: trade openness; vulnerability; poverty; risk; consumption behaviour; Vietnam
    JEL: F14 O12 D12 C31
    Date: 2017–11
  12. By: Tao, Yubo (School of Economics, Singapore Management University); Phillips, Peter C.B. (Yale University); Yu, Jun (School of Economics, Singapore Management University)
    Abstract: This paper studies a continuous time dynamic system with a random persistence parameter. The exact discrete time representation is obtained and related to several discrete time random coefficient models currently in the literature. The model distinguishes various forms of unstable and explosive behaviour according to specific regions of the parameter space that open up the potential for testing these forms of extreme behaviour. A two-stage approach that employs realized volatility is proposed for the continuous system estimation, asymptotic theory is developed, and test statistics to identify the different forms of extreme sample path behaviour are proposed. Simulations show that the proposed estimators work well in empirically realistic settings and that the tests have good size and power properties in discriminating characteristics in the data that differ from typical unit root behaviour. The theory is extended to cover models where the random persistence parameter is endogenously determined. An empirical application based on daily real S&P 500 index data over 1964-2015 reveals strong evidence against parameter constancy after early 1980, which strengthens after July 1997, leading to a long duration of what the model characterizes as extreme behaviour in real stock prices.
    Keywords: Continuous time models; Explosive path; Extreme behaviour; Random coefficient autoregression; In fill asymptotics; Bubble testing.
    JEL: C13 C22 G13
    Date: 2017–11–30
  13. By: Vinokurov, Evgeny
    Abstract: ASEAN regional financial integration evolves within four domains: the banking sector, liberalizing foreign direct investments, liberalizing capital flows, and ensuring regional financial stability. Progress so far has been limited. Regional integration as concerns the liberalization of capital markets and, in particular, the banking sector, proceeds with the most difficulty. By most criteria, ASEAN is well positioned to benefit from deeper financial integration. Comparative analysis also demonstrates that there is a substantial ‘learning factor’ in this technically complicated field: while ASEAN learns about the EU, the Eurasian Union is taking a close look at ASEAN’s experience of integration of the financial markets.
    Keywords: ASEAN, regional integration, financial integration, financial stability, capital market, foreign direct investment
    JEL: F15 F21 F34 F36 G15
    Date: 2017
  14. By: John Rand
    Abstract: Utilizing a panel of over 2,000 Vietnamese SMEs over a 10-year period, we analyse the importance of being politically connected on both access and cost-of-credit obtained from formal financial institutions. Controlling for unobserved time-invariant firm-level heterogeneity, productivity self-selection concerns, and access to alternative credit markets, we show that political connections decreases the likelihood of being credit-constrained by 4 percentage points. Moreover, politically connected firms accessing credit face lower cost-of-capital than non-connected SMEs not excluded from formal financial markets. However, the impact of political connections is most valuable during periods of financial distress, but less prevalent during business cycle upswings.
    Date: 2017
  15. By: International Monetary Fund
    Abstract: Federated States of Micronesia (FSM) is a small and sparsely-populated state vulnerable to climate change. Over the medium term, the country needs to prepare for the expiration of U.S. Compact grants from FY2024 onward, adapt to climate change, facilitate sustainable private-sector growth, and promote safe financial inclusion. A new national government was formed in mid-2015.
    Keywords: Asia and Pacific;Micronesia, Federated States of;
    Date: 2017–09–15
  16. By: Chang, Jae-Hee.; Rynhart, Gary.; Huynh, Phu.
    Keywords: future of work, technological change, textile industry, clothing industry, shoe industry, ASEAN countries
    Date: 2016
  17. By: Markus Leibrecht (Henley Business School, Malaysia Campus); Joelle H. Fiong (Nanyang Business School, Nanyang Technological University);
    Abstract: Pension systems are core institutional arrangements that are expected to be stable and reliable over consecutive generations. Nevertheless, reforms in pension provision intensified over the past decades, with several countries opting for privatisation of their pension system. We ask which factors lead governments to privatise pension systems and focus on economic crises and different facets of increased global pressures. We conduct duration analyses on a cross-section of nearly 100 economies among which 28 privatise their pension system between 1981 and 2012. Consistent with the crisis-begets-reform hypothesis, we find that severe economic crises speed up reform implementation. Likewise, high growth in economic and political globalisation is conducive for pension privatisation. These findings are robust to a variety of alternations in the empirical methodology.
    Keywords: economic crisis, pension reform, globalisation, duration analysis, privatisation
    JEL: H11 H12 H55 P11
    Date: 2017–08
  18. By: Riccardo Pelizzo (Nazarbayev University, Kazakhstan); Zim Nwokora (Deakin University, Australia)
    Abstract: The purpose of this paper is to explore in greater detail the nexus between party system change and democratic qualities. In doing so, we do not simply assess whether, how and to what extent qualities of democracy in East Africa are affected by the instability of the patterns of inter-party competition (fluidity of the party system), but we also plan to show how the sub-components of party system fluidity (frequency of change, scope of change, variety of change) influence the democratic qualities. By disaggregating fluidity in its constitutive elements and by testing how each of them affects the qualities of democracy, we find that while the frequency of change has a beneficial impact on the qualities of democracy, the other sub-components of fluidity—namely, the “scope” and “variety” of system change—have a consistently negative effect on democratic quality.
    Keywords: party system change, East Africa, South East Asia, fluidity, democracy
    JEL: D02 D72 H00 H11 H89 O00 O10 O43 O55
    Date: 2017–01
  19. By: Markus Leibrecht (Henley Business School, Malaysia Campus); Johann Scharler (University of Innsbruck);
    Abstract: The effects that financial crises exert on public debt-to-GDP ratios have received substantial attention in policy circles and academia alike. We add to this discussion by exploring the impact of financial crises on the composition of public spending and tax revenues. Using the Jorda (2005) local projection approach and data from 23 advanced OECD countries, ranging from 1970 to 2016, we find that expenditures on social security and on interest payments increase relative to total spending, whereas the share of public investment expenditures declines in the aftermath of financial crises. This shift in expenditure composition mainly arises in highly financially developed economies. Our results are also indicative for a financial crisis-induced shift to more long-run economic growth-friendly types of revenues. However, this shift mainly occurs in less financially developed economies.
    Keywords: Composition of public budgets, financial crisis, public debt
    JEL: G01
    Date: 2017–08

This nep-sea issue is ©2017 by Kavita Iyengar. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.