nep-sea New Economics Papers
on South East Asia
Issue of 2019‒02‒04
23 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. A new causality test for the analysis of the export-growth nexus By Furuoka, Fumitaka
  2. The Belt and Road Initiative. Demographic trends, labour markets and welfare systems of member countries By Bruni, Michele
  3. Estimating the impacts of financing support policies towards photovoltaic market in Indonesia: A social-energy-economy-environment (SE3) model simulation By M. Indra al Irsyad; Anthony Halog; Rabindra Nepal
  4. Determinants of food price inflation: evidence from Malaysia based on linear and nonlinear ARDL By Hasan, Amiratul Nadiah; Masih, Mansur
  5. What Drives Female Labor Force Participation? Comparable Micro-Level Evidence from Eight Developing and Emerging Economies By Klasen, Stephan; Pieters, Janneke; Santos Silva, Manuel; Ngoc Tu, Le Thi
  6. Transformational Leadership in Digital Era: Analysis of Nadiem Makarim (Founder of GO-JEK Indonesia) Leadership Figure By Junita, Imelda
  7. Public Service and Micro-Small Enterprise Developments in Indonesia By Kartika, Metasari
  8. Reducing emissions of the fast growing Vietnamese coal sector: the chances offered by biomass co-firing By An Truong; Piera Patrizio; Sylvain Leduc; Florian Kraxner; Minh Ha-Duong
  9. The Influence of Zakat on Economic Growth and Welfare Society in Indonesia By Khasandy, Elleriz Aisha; Badrudin, Rudy
  10. Is residential property the ultimate hedge against inflation ? new evidence from Malaysia based on ARDL and nonlinear ARDL By Aqsha, Nur Suhairah; Masih, Mansur
  11. Fiscal Policy and Development; Human, Social, and Physical Investments for the SDGs By Vitor Gaspar; David Amaglobeli; Mercedes Garcia-Escribano; Delphine Prady; Mauricio Soto
  12. Fixed Sample Size as an Internal Control By Meirini, Dianita; Andari, Atik Tri; Aalin, Elmi Rakhma
  13. Determinants of Foreign Direct Investment in Fast-Growing Economies: Evidence from the BRICS and MINT Countries By Asongu, Simplice; Akpan, Uduak; Isihak, Salisu
  14. Employment Situation of Person with Disabilities: Case Study in Indonesia By Frian, Antonio; Mulyani, Fransiska; Joachim, Hansi; Anggreni, Dellia; Effendi, Willy Yanto
  15. Is gold a hedge against equity risk? Malaysian experience based on NARDL approach By Sabry, Saajid; Masih, Mansur
  16. State capitalism, economic systems and the performance of state owned firms By Estrin, Saul; Liang, Zhixiang; Shapiro, Daniel; Carney, Michael
  17. Exchange rate and trade balance linkage: evidence from Malaysia based on ARDL and NARDL By Adznan, Syaima; Masih, Mansur
  18. Identifying the symptoms of financial crises By Batista, Blessica
  19. Monetary and Exchange Rate Policies for Sustained Growth in Asia By Joseph E Gagnon; Philip Turner
  20. The dynamics of health care and growth: A model with physician in dual practice By Baris Alpaslan; King Yoong Lim; Yan Song
  21. Is the relation between lending interest rate and non-performing loans symmetric or asymmetric ? evidence from ARDL and NARDL By Bahruddin, Wan Athirah; Masih, Mansur
  22. Is inflation targeting compatible with economic growth ? Korean experience based on ARDL and NARDL By Affendi, Diyana Najwa; Masih, Mansur
  23. Tax transition in developing countries: Do VAT and excises really work? By Adandohoin, Kodjo

  1. By: Furuoka, Fumitaka
    Abstract: This paper proposes a new causality test or a Fisher-type causality test to examine empirically the export-growth nexus. To empirically demonstrate this new causality test procedure, the Fisher causality test is used to examine the exports-growth nexus in four Asian economies, namely Indonesia, Philippines, Hong Kong and Japan. The new causality test could detected a complex situation in the export-growth nexus in Asia. The Fisher causality test clearly pointed out that there are unidirectional causality from economic growth to exports in Indonesia, bidirectional causality between exports and economic growth in Philippines, no causality relationship between exports and economic growth in Hong Kong and Japan.
    Keywords: Exports, economic growth, causality test, Asia
    JEL: C22 F43
    Date: 2018–12–15
  2. By: Bruni, Michele
    Abstract: A brief analysis of the different demographic tendencies that will affect the 65 countries of the Belt and Road Initiative allows to point out that they are largely spread along the path of the demographic transition so that in some working age population will dramatically decline, in others will dramatically increase. The implication is that the first group of countries (epitomized by China, Russia, Thailand, but also by Singapore) will be affected by a structural shortage of labour, the second (well represented by India, but also by Pakistan, Egypt and Philippines) by a structural excess of labour. Therefore, for the countries of the first group immigration will not be an option but a necessity, while for the countries of the second group emigration will not be an option but a necessity. The situation suggests that it would be in the interest of all BRI countries to design, develop and implement a policy framework that would allow them to jointly manage migration flows in the amount and with the educational stricture coherent with their needs. However, such a process is extremely difficult and complex and to succeed needs to be properly directed and orchestrated. The paper argues that given its size, the dimension of its need of foreign labour, and its role in the Belt and Road Initiative it is China that should take the lead of a rational approach that falls well inside the strategies of the Initiative.
    Keywords: Belt and Road Initiative,China,migration,labour market,demographic transition,demographic polarization
    JEL: J11 J2 J61
    Date: 2019
  3. By: M. Indra al Irsyad; Anthony Halog; Rabindra Nepal
    Abstract: This study estimates the impacts of four solar energy policy interventions on the photovoltaic (PV) market potential, government expenditure, economic growth, and the environment. An agent-based model is developed to capture the specific economic and institutional features of developing economies, citing Indonesia as a specific case study. We undertake a novel approach to energy modelling by combining energy system analysis, input-output analysis, life-cycle analysis, and socio-economic analysis to obtain a comprehensive and integrated impact assessment. Our results, after sensitivity analysis, call for abolishing the existing PV grant policy in the Indonesian rural electrification programs. The government, instead, should encourage the PV industry to improve production efficiency and to provide after-sales service. A 100-watt peak (Wp) PV under this policy is affordable for 33.2 percent of rural households without electricity access in 2010. Rural PV market size potentially increases to 82.4 percent with rural financing institutions lending 70 percent of capital cost for five years at 12 percent annual interest rate. Additional 30 percent capital subsidy and 5 percent interest subsidy slightly increase the rural PV market potential to 89.6 percent of PV adopters. However, the subsidies are crucial for creating PV demands by urban households but the most effective policy for promoting PV to urban households is the net metering scheme. Several policy proposals are discussed in response to these findings.
    Keywords: hybrid energy model, developing country, renewables policy, impact assessments, agent-based modelling, photovoltaic system
    JEL: C60 Q21 Q43 Q48
    Date: 2019–01
  4. By: Hasan, Amiratul Nadiah; Masih, Mansur
    Abstract: Given the adverse impact of growing inflation on food prices and the importance of policymakers to keep the food price inflation stable, this study aims to investigate the determinants of food price inflation. This study contributes to the existing literature by employing Nonlinear ARDL (NARDL) technique to identify whether the relationship between the focused variables is linear and symmetric or not. This study finds that the variables are cointegrated in the long run. The error correction model VECM and the Variance Decompositions analysis found that the exchange rate is the most exogenous variable and the government has no control over it since it is determined by the external factors such as, supply and demand for Malaysia ringgit. Further, NARDL found that the relationship between the food price and exchange rate to be symmetric in the long run but asymmetric in the short run. Since the exchange rate is the most exogenous variable in this study and the fact that Malaysia in on flexible exchange regime, it makes it hard for the policy makers to control the fluctuations of the Malaysian exchange rate to control food price. Hence the adjustment and control of food price should be made through the reduction of the food import in order to minimise the exchange rate pass through effect on the food price inflation.
    Keywords: food price inflation, exchange rate, ARDL, Nonlinear ARDL, Malaysia
    JEL: C22 C58 E44
    Date: 2018–12–31
  5. By: Klasen, Stephan (University of Göttingen); Pieters, Janneke (Wageningen University); Santos Silva, Manuel (University of Göttingen); Ngoc Tu, Le Thi (University of Göttingen)
    Abstract: We investigate the micro-level determinants of labor force participation of urban married women in eight low- and middle-income economies: Bolivia, Brazil, India, Indonesia, Jordan, South Africa, Tanzania, and Vietnam. In order to understand what drives changes and differences in participation rates since the early 2000s, we build a unified empirical framework that allows for comparative analyses across time and space. We find that the coefficients of women's characteristics differ substantially across countries, and this explains most of the between-country differences in participation rates. In particular, the relationship between a woman's education and her participation in the labor force varies from being positive and linear (Brazil and South Africa) to being U- or J-shaped (India, Jordan, and Indonesia), or a mixture of both (Bolivia, Vietnam, and Tanzania). Overall, the economic, social, and institutional constraints that shape women's labor force participation remain largely country-specific. Nonetheless, rising education levels and declining fertility consistently increased participation rates, while rising household incomes contributed negatively in relatively poorer countries, suggesting that a substantial share of women work out of economic necessity.
    Keywords: female labor force participation, gender, labor markets, development
    JEL: J20 J16 I25 O15
    Date: 2019–01
  6. By: Junita, Imelda
    Abstract: Technology and internet have driven innovation and new opportunities by digitizing customers, companies, products, services, and processes. In the digital era, the company has potential to touch all aspects of the business, including customers, employees, partners, business processes, and also a global network of businesses and things from every industry around the world. These conditions bring fundamental changes to community behaviours and its potential consequences. When the organizations adapt themselves to the changes, they require transformational leadership. The objective of this paper is to describe the concept of transformational leadership as a hallmark of a future digital business leader. From the evidence in the literature, in many successful organizations, transformational leaders have contributed to increasing the effectiveness and performance of the organizations. By using the descriptive method with a phenomenological approach, the practice of transformational leadership of Nadiem Makarim as the founder of GO-JEK Indonesia (an Indonesian-owned and run technology start-up that specializes in ride-hailing, logistics, and digital payments) is examined. Then, this paper as a preliminary study provides a review of how Makarim’s leadership philosophy and practice has brought GO-JEK into success, Indonesia’s biggest start-up.
    Keywords: transformational leadership; successful organization
    JEL: L91 O15
    Date: 2019–01–05
  7. By: Kartika, Metasari
    Abstract: This study aims to analyze the influence of public service on the Micro-Small Enterprise (MSE) developments in Indonesia. The study method used was regression analysis panel data with fixed effect approach; because of the limited data availability, the data was only taken from 2013-2015. The study findings show that public service and education projected by gross participation data have a positive influence on the development of MSE, while the economic growth and minimum wage policy have a negative influence on the development of MSE in Indonesia. Based on those findings, this study concludes that the public service in the form of government spending allocation policy, especially on the service and economic functions, will stimulate the increase of MSE numbers.
    Keywords: public; education; growth; wage; enterprise; business
    JEL: L32
    Date: 2019–01–05
  8. By: An Truong (CleanED - Clean Energy and Sustainable Development Lab - USTH - University of sciences and technologies of hanoi); Piera Patrizio; Sylvain Leduc (IIASA - International Institute for Applied Systems Analysis); Florian Kraxner (IIASA - International Institute for Applied Systems Analysis); Minh Ha-Duong (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Vietnam's Power Development Plan 7A authorized many new coal power plants projects, implying an increase of greenhouse gases emissions from 90 MtCO2eq/year today to 360 MtCO2eq/year in 2030. How could co-firing technology-that is the partial substitution of coal by biomass-contributes to mitigate that problem? In this study, we assess the costs and potentials of co-firing rice residues in present and planned coal power plants in Vietnam using a spatially explicit optimization model: BeWhere, adapted as recursive annual dynamic. We found that, the cost of CO2 emissions is the key parameter determining at what level the technology is used. A cost of CO2 emissions of 8 $/tCO2 mobilizes the maximum technical potential of the rice straw and husk domestic resource, with an annual emission reduction of 28 MtCO2eq/year by 2030. At this level, biomass co-firing contributes to an 8% emission reduction in the coal power sector with the abatement cost of 137 Million USD.
    Keywords: spatial explicit exploration,greenhouse gas emissions,Co-firing,emission reduction,bioenergy,rice residues
    Date: 2019–01–08
  9. By: Khasandy, Elleriz Aisha; Badrudin, Rudy
    Abstract: Indonesia as a one of the most significant Muslim population in the world has developed zakat rapidly; it is shown by the development of the zakat regulation and establishes of Badan Amil Zakat Nasional (BAZNAS). Zakat has many benefit for economic both of macro and micro aspect, such as foster inclusive economic growth. The objective of this study are 1) to examine the influence of zakat on economic growth and welfare society which uses 3 (three) indicators i.e.HDI, Percentage of Poor People, and GINI Index and 2) to investigate whether items of Theory Planned Behavior influence of zakat payment. The researcher used Structural Equation Model (SEM) with PLS software. The result showed that zakat in Indonesia does not influence economic growth and welfare society. Besides that, welfare society Indonesia as a developing country has a negative value to HDI and GINI index but has a positive value to Percentage of Poor People.
    Keywords: zakat; growth; welfare; planned behavior
    JEL: D53 O47
    Date: 2019–01–05
  10. By: Aqsha, Nur Suhairah; Masih, Mansur
    Abstract: Residential property is seen as a good investment asset which can protect the real wealth of investors against increase in prices of goods and services. Despite rising house prices, consumer home buying power is still going strong in Malaysia. Nevertheless, many believe that over longer time horizon, house prices could decline jeopardizing the real returns on investment especially during inflationary pressure. Therefore, this paper aims to analyze the inflation-hedging abilities of Malaysian housing properties both in the long run and short run. We extend current literature using relatively advanced technique of NARDL (Shin et al, 2014) in order to examine the intrinsic asymmetric relationship among the variables. Different hedging tools are included for comparison purpose namely, gold price and stock price. Overall, we find that house price responds to inflation rate asymmetrically in the long run. Gold has asymmetric linkage with inflation but the NARDL estimation result is insignificant, whereas stock price is proven to be a much better option as it reacts symmetrically over both short- and longer-time horizon. However, house ownership can still hedge against inflation in the long-run since the home prices have risen faster than inflation rate during the recent housing bubbles. The findings tend to suggest that ignoring potential nonlinearity may lead to misleading evidence as house prices can be influenced by different macroeconomic determinants. Therefore, it could be of major importance for more effective property investment and policymaking in the context of the Malaysian house market.
    Keywords: Residential Property, House Price, Inflation, Hedging, Nonlinear ARDL, Malaysia
    JEL: C58 E44
    Date: 2018–12–30
  11. By: Vitor Gaspar; David Amaglobeli; Mercedes Garcia-Escribano; Delphine Prady; Mauricio Soto
    Abstract: The goal of this paper is to estimate the additional annual spending required for meaningful progress on the SDGs in these areas. Our estimates refer to additional spending in 2030, relative to a baseline of current spending to GDP in these sectors. Toward this end, we apply an innovative costing methodology to a sample of 155 countries: 49 low- income developing countries, 72 emerging market economies, and 34 advanced economies. And we refine the analysis with five country studies: Rwanda, Benin, Vietnam, Indonesia, and Guatemala.
    Keywords: Sustainable development;Foreign aid;Sustainable Development Goals (SDG);Development;Fiscal policy;Sustainable Development Goals; Fiscal Policy, Sustainable Development Goals, Structure and Scope of Government, General, International Fiscal Issues, Fiscal and Monetary Policy in Development, Health and Economic Development, Education and Economic Development, Railroads and Other Surface Transportation: Autos, Buses, Trucks, and Water Carriers, Electric Utilities
    Date: 2019–01–23
  12. By: Meirini, Dianita; Andari, Atik Tri; Aalin, Elmi Rakhma
    Abstract: This study aims to analyze the effectiveness of internal control on two existing Community Banks in Tulungagung. According to Bank Indonesia rank, Tulungagung occupies the 1st position of the highest NPL in 2016. The effectiveness analysis of internal control is performed on the second Community Bank crediting system that includes qualitative and quantitative aspects analysis. Qualitative aspect analysis is based on Audit Standard applicable in Indonesia (AS) Section 319 Consideration of Internal Control in Audit of Financial Statements paragraph 07. Quantitative aspect analysis using Fixed Sample Size with a 95% confidence level and fault tolerance / DUPL (Desired Upper Precision Limit) = 5%. The result of the qualitative aspect shows the internal control system in both Community Banks is effective. It’s based on conformity between AS Section 319 and its implementation on both Community Bank. Total 20 questions for conformity analysis, 1st Community Bank for the next called BPR A is 80% appropriate, 2nd Community Bank for the next called BPR B is 60% appropriate. The rest questions are used as an attribute on quantitative analysis. The result of the quantitative aspect shows the internal control system in both Community Banks is not effective. This is because the AUPL (Achieved Upper Precision Limit) from three attribute samples analyzed exceed specified DUPL, that is: a) Authorization of credit approval documents AUPL = 18%, b) Completeness of supporting documents attached AUPL = 28%, and c) Verification of transaction correctness and correctness of ceiling calculation AUPL credit = 29%.
    Keywords: internal control; mixed method; fixed sample size
    JEL: E58 G21
    Date: 2019–01–05
  13. By: Asongu, Simplice; Akpan, Uduak; Isihak, Salisu
    Abstract: This study employs panel analysis to examine the determinants of foreign direct investment (FDI) to Brazil, Russia, India, China, and South Africa (BRICS) and Mexico, Indonesia, Nigeria, and Turkey (MINT) using data for eleven years i.e. 2001 – 2011. First, it uses pooled time-series cross sectional analysis to estimate the model on determinants of FDI for three samples: BRICS only, MINT only, and BRICS and MINT combined; then, fixed effects model is also employed to estimate the model for BRICS and MINT combined. The results show that market size, infrastructure availability, and trade openness play the most significant roles in attracting FDI to BRICS and MINT while the roles of availability of natural resources and institutional quality are insignificant. Given that FDI inflow to a country has the potential of being mutually beneficial to the investing entity and host government, the challenge is on how BRICS and MINT can sustain the level of FDI inflow and ensure it results in economic growth and socio-economic transformation. To sustain the level of FDI inflow, governments of BRICS and MINT need to ensure that their countries remain attractive for investment. BRICS and MINT also need to ensure that their economies absorb substantial skills and technology spillovers from FDI inflow to promote sustainable long-term economic growth by investing more in their human capital. The study is significant because it contributes to literature on determinants of FDI by extending the scope of previous studies which often focus only on BRICS.
    Keywords: FDI, determinants, fast-growing economies, BRICS, MINT
    JEL: C52 F21 F23 O40 P37
    Date: 2018–01
  14. By: Frian, Antonio; Mulyani, Fransiska; Joachim, Hansi; Anggreni, Dellia; Effendi, Willy Yanto
    Abstract: Equality in an employment opportunity or commonly known Equal Employment Opportunity (EEO)is still not entirely applicable to a person with disabilities. World Report on Disability record 15,3 percent of the world population is the person with disabilities at 2010. Most of the person with disabilities had not taken part in the mainstream of social activity and mostly relied on social aid, including in Indonesia, where 74,7 percent from the total of a person with disabilities are unemployed. Their living expenses and necessities mostly sustained by their own family, government, or social organization – which had caused a considerable loss for concerned parties. This research intended to discover factors that influence the low employment of a person with disabilities in Indonesia, then aim for the correlations between those factors to the acceptance of employer for a person with disabilities, as well as recommending concerned employer or organizations in supporting employment opportunities for persons with disabilities. Research methodology is done by the survey to an employee about their viewpoint towards workers with disabilities, and data processing is done by SPSS software. Results of research show that education level and design of work procedure significantly affect the low employment rate of workers with disabilities in Indonesia. Further studies and development required to elaborate proper job design for a worker with disabilities, also for developing education system for workers with disabilities.
    Keywords: disabilities; employment; equal; opportunity; discrimination; surveys
    JEL: J21 M51 O15
    Date: 2019–01–05
  15. By: Sabry, Saajid; Masih, Mansur
    Abstract: The chain of financial crises that had been occurring raised a serious concern among the investors regarding its equity risk. There is a need to rethink about gold as a hedge against its equity risk in the long run. Hence, the question is whether gold is a good hedge against equity risk? We use a recently developed time series technique namely, nonlinear ARDL (NARDL) to test the long term asymmetric relationship between gold price and Kuala Lumpur Composite Index. To the best of our knowledge, this would be the first attempt to use NARDL to look into the long run asymmetric relationship between these variables. Our results tend to suggest that gold price in the Malaysian context is determined by external factors, specifically cultural preferences. Also, it has a negative relationship making gold a good hedge against equity risk. This finding would be important for the investors to consider to have gold in their portfolio to hedge against equity risk in Malaysia.
    Keywords: Malaysia, Emerging markets, Gold, Investments, Stock markets, Gold investment, NARDL
    JEL: C22 C58 G11
    Date: 2018–12–30
  16. By: Estrin, Saul; Liang, Zhixiang; Shapiro, Daniel; Carney, Michael
    Abstract: In this paper, we pursue two related research questions. First, we enquire whether state owned enterprises (SOEs) perform better than privately owned firms in a large variety of emerging markets. To test this, we develop a unique dataset using firm-level data from the World Bank Enterprise Survey (WBES), resulting in a sample of over 50,000 firms from 57 understudied countries including emerging capitalist, former socialist and state capitalist ones. Our results suggest that SOEs do display productivity advantages over private firms in these understudied economies. Our second research question asks whether the performance of state-owned firms in these understudied countries is context specific, namely whether performance depends on the institutional system to which a country is classified. We refer to these systems as configurations. In particular, we are interested in whether state owned firms perform better in “state capitalist” countries including China and Vietnam. We find empirical support for the argument that the “state led” configuration provides better institutional support for the ownership advantages of SOEs than others.
    Keywords: comparative economic systems; state ownership; varieties of institutional systems (VIS); firm performance
    JEL: L44 P31 P5
    Date: 2018–10–05
  17. By: Adznan, Syaima; Masih, Mansur
    Abstract: The exchange rate is able to influence the trade balance in most of countries’ economy. When a country's trade account does not net to zero – that is, when exports are not equal to imports – there is relatively more supply or demand for a country's currency, which influences the price of that currency on the world market. However, the relationship between exchange rate and trade balance is indecisive both in long run and short run. The purpose of this paper is to examine the relationship between exchange rate and trade balance in Malaysia. This study extends prior literature by using a more recent monthly time series data and relatively advanced techniques known as ARDL and NARDL. Based on this study, it is found that the relationship between these two variables exists. It also found that trade balance is worsened in the short-run in line with the J-curve theory. These results imply that there is a trade-off of depreciation between short-run and long-run, and between exporting sectors and importing sectors. Policymaker could moderately depreciate the currency to boost trade balance but needs to effectively manage the cost incurred.
    Keywords: Trade Balance, Interest Rate, NARDL, ARDL, Malaysia
    JEL: C22 C58 G15
    Date: 2018–12–30
  18. By: Batista, Blessica
    Abstract: This article explores if there are common symptoms and steps to international financial crises by examining the causes and progress of financial crisis in Latin America and South East Asia. The symptoms are a currency crisis, a banking crisis, a sovereign debt crisis and a balance of payments crisis. It will also attempt to the question as to what is the relative responsibility of the center and the periphery of the international financial system in the genesis of crises.
    Keywords: Financial crises
    JEL: N2 N20
    Date: 2018
  19. By: Joseph E Gagnon; Philip Turner
    Abstract: The more advanced economies in Asia are experiencing slower growth rates. Structural reforms are the most important policies for keeping growth rates up, but this paper takes the growth slowdown as given and focuses on implications for monetary policy. The key policy implication is the impor­tance of keeping core inflation at or above 2 percent to avoid prolonged periods of economic slack.
    Date: 2019–01
  20. By: Baris Alpaslan; King Yoong Lim; Yan Song
    Abstract: We present a growth model with micro-foundations of a mixed health care system and physician dual-practice, to analyze for welfare-optimal government financing strategy for a mixed health system in developing countries. Calibrating the model for Indonesia, we find that a government subsidy to private health care is both growth- and welfare-enhancing, whereas it is more effective for the government to invest in health infrastructure instead of a public-sector “rewarding” policy in raising government physicians’ wage if its goal is to improve physician effort in public practice. Indeed, for the “rewarding” policy, a dynamic trade-off in growth is found, which is not previously documented in the literature. We also find the model to produce two regimes with different welfare-optimal health financing (a “normal” regime and a low public-sector congestion regime). In the former, welfare-optimal health financing strategy appears to be promoting private health subsidy at the expense of public-sector physician wages. In the latter, the opposite is welfare-optimal.
    Keywords: Dual Practice, Economic Growth, Health Care Financing, Welfare
    JEL: H51 I11 I15 O41
    Date: 2019–01
  21. By: Bahruddin, Wan Athirah; Masih, Mansur
    Abstract: Lending interest rate has an inherent implicit cost on the credit issued by banks with implication on loan defaults. In this regard, high level of non-performing loans ( NPLs) will depress economic growth owing to many banks refusing to lend. This paper makes the initial attempt to test the non-linear asymmetric relationships between lending interest rate and NPLs by using the NARDL approach and provides a direction of Granger causality between the lending interest rate and NPLs. Malaysia is used as a case study. The finding tends to indicate that lending interest rate and NPLs has an asymmetric relationship in the short-run and symmetric relationship in the long-run. This paper suggests that banks can improve their quality credit management by streamlining their collection process and the quality of customers in order to reduce the number of NPLs in the short-run. Besides, banks can keep their total risk low by diversifying their loan portfolios.
    Keywords: Lending interest rates, non-performing loans, ARDL, NARDL, Malaysia
    JEL: C22 C58 E44
    Date: 2018–12–31
  22. By: Affendi, Diyana Najwa; Masih, Mansur
    Abstract: The relationship between inflation and growth has been one of the most widely researched topics in economics. Studies have shown various outcomes, deeming positive, negative and non-existence of relationship between the two macroeconomic variables, and the result varies among the areas of study. The complex dynamics between inflation and growth has made it difficult for policy makers to comprehend whether inflation targeting policy will result in favourable or adverse effect to the economic growth. This paper aims to study the relationship between inflation and economic growth in South Korea, one of the fastest growing economies in Asia. Consumer Price Index (CPI) will be used as an indicator for inflation and GDP by market price is used to represent the economic growth. Using the recent time series techniques, ARDL and NARDL, the study seeks to find the long-term relationship and causality between the two variables. Based on the results, it is found that inflation is exogenous, while GDP is endogenous. The relationship between inflation and GDP is also found to be asymmetric in the long run. The policy implication of this study is that the central bank of Korea should not adopt inflation targeting policy while having the objective of boosting the GDP in mind since they are conflicting macroeconomic objectives. Instead, inflation targeting policy should be applied mainly to focus on keeping the price stability.
    Keywords: Inflation, Economic growth, ARDL, NARDL
    JEL: C22 C58 E44
    Date: 2018–12–28
  23. By: Adandohoin, Kodjo
    Abstract: This paper investigates the role of Value Added Tax (VAT) and excises as first wave tax transition tools in developing countries. Focusing on a sample of 96 developing countries over the period 1985-2013, we investigate whether the adoption of VAT enable developing countries to increase the likelihood of succeeding tax transition. Results indicate that having a VAT, allow developing countries to increase the probability of succeeding tax transition by near 10%. We further investigate the extent to which VAT and excises offset trade tax revenue losses of trade liberalization in these countries. Our estimates reveal that VAT is offsetting by 67% trade tax revenue losses in developing countries with an U relationship, while this effect holds for excises duties with an U inverted relationship. The study also points out heterogeneities (while VAT tax transition effect is robust to African and Asian countries, it seems not for Latin American countries), as well as asymmetries (the revenue collection of VAT and excises didn’t increase the period over which developing countries face an increase in trade tax). Overall, the study concludes that, first wave tax transition even strengthened by these instruments, seems not irreversible. It suggests to take with more close attention VAT and excises as performant first wave tax transition tools in developing countries.
    Keywords: Tax transition, VAT, Excises, Developing countries.
    JEL: H20
    Date: 2018–10–19

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