Asia

Publication date: Available online 25 April 2013
Source:Journal of Asian Economics

Author(s): Lulu Gu , W. Robert Reed

This paper connects three subjects related to international financial markets -- (i) information asymmetry, (ii) market segmentation, and (iii) cross-listings -- and highlights their implication for event study methodology. When firms list equities on more than one exchange, and the exchanges are characterized by different information sets, a problem arises as to which exchange(s) to include in the event study sample. If market segmentation impedes the arbitrage of these multiple responses, then the use of a single listing (for a firm that is cross-listed) can yield abnormal return estimates that are biased. In such circumstances, using returns from all the markets in which a firm's securities are listed not only increases the sample size (often an important consideration when undertaking event studies in emerging markets), but also enables full-information abnormal return estimates to be obtained. What is required is a method that extracts the independent information from each listing while counting the common information only once. In this paper, we develop an estimation procedure that achieves these twin objectives. We then apply our approach to an event study of Chinese overseas mergers and acquisitions, and compare results from alternative samples and estimators. We demonstrate that including return data from cross-listings of the same firm can result in substantially different conclusions.

Publication date: Available online 24 April 2013
Source:Journal of Asian Economics

Author(s): I.-Chun Tsai

This paper analyzes the volatile behavior of index returns in the following Asian Real Estate Investment Trust (REIT) markets: South Korea, Singapore, Japan, Taiwan, Hong Kong, Malaysia, and Thailand. It also analyzes the conditional volatilities of REIT returns and determines whether any volatility clustering, size, liquidity, or contagion effects exist in their fluctuations. The results indicate that all REIT returns have volatility clustering effects. Moreover, the behavior of the REIT returns in Singapore, Hong Kong, Malaysia, and Thailand are similar, with their fluctuations being caused mainly by the size effect. In Japan, South Korea, and Taiwan, the REIT returns are mostly connected with the stock markets because of the contagion effect in these countries. Finally, the Japan REIT market is the most volatile, with its market returns being influenced by leverage, size, and contagion effects simultaneously.

Publication date: Available online 23 April 2013
Source:Journal of Asian Economics

Author(s): Matthew S. Yiu , Jun Yu , Lu Jin

This study uses a newly developed bubble detection method (Phillips, Shi and Yu, 2011) to identify real estate bubbles in the Hong Kong residential property market. Our empirical results reveal several positive bubbles in the Hong Kong residential property market, including one in 1995, a stronger one in 1997, yet another one in 2004, and a more recent one in 2008. In addition, the method identifies two negative bubbles in the data, one in 2000 and the other one in 2001. These empirical results continue to be valid for the mass segment and the luxury segment. However, this method has also found a bubble in early 2011 in the overall market, and in the mass segment but not in the luxury segment. This result suggests that the bubble in early 2011 in the Hong Kong real estate market was caused primarily by the mass segment under the demand pressure from end-users of small-to-medium sized apartments.

Publication date: Available online 22 April 2013
Source:Journal of Asian Economics

Author(s): Joakim Westerlund

This paper proposes a new unit root test that is general enough to accommodate a potentially non-linear deterministic trend function, making it one of the most general tests around. However, the main advantage lies with its simple implementation. In particular, the asymptotic critical values are shown to be “almost” independent of the deterministic trend function, and as a result the test can be implemented without the need for model-specific critical values. The new test is applied to a sample consisting of monthly prices of four precious metals for a number of Asian countries.

Publication date: Available online 22 April 2013
Source:Journal of Asian Economics

Author(s): Shu-Fei Yang , Kun-Ming Chen , Tai-Hsin Huang

This paper uses firm-level panel data from Taiwan's manufacturing industries from 1987-2000 to investigate the impact of outward foreign direct investment (OFDI) on the technical efficiency of the OFDI firms. Propensity score matching is used to construct an appropriate group of non-OFDI firms to compare with OFDI firms, and a metafrontier framework is subsequently used to calculate comparable technical efficiencies for both groups of firms. Our empirical results reveal that the technical efficiencies of Taiwan's manufacturing firms were increasing over the entire sample period. In addition, our results suggest that the technological advances and the technical efficiency of Taiwan's manufacturing firms are positively correlated with their OFDI activity.

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Author(s): Jirawan Boonperm , Jonathan Haughton , Shahidur R. Khandker

Launched in 2001, the Thailand Village and Urban Community Fund (VF) provided almost US$2billion – a million baht for each of Thailand's 78,000 villages and wards – to provide working capital for locally-run rotating credit associations. Using data from the Thailand Socioeconomic Surveys of 2002 and 2004, we find that VF borrowers were disproportionately poor and agricultural. A fixed effects model using a panel of rural households for these years finds that VF borrowing is associated with, on average, 3.5% more current spending, and 1.4% more income; very similar impacts are found using a propensity score matching model applied to nationwide data in 2004, which also found that VF loans are associated with the acquisition of more durable goods. By way of contrast, borrowing from the Bank for Agriculture and Agricultural Cooperatives appears to have a stronger effect on income than on expenditures. The evidence also shows that the effect on expenditure (or income) of VF borrowing is strongest at the lower quantiles, and flowed disproportionately to low-income households; in both of these senses it is “pro-poor”.
Highlights ► The Thailand Village Fund is one of the largest microcredit programs anywhere. ► Village Fund borrowing is associated with 3.5% more spending, and 1.4% more income. ► The findings are based on the 2002 and 2004 Socioeconomic Surveys, including a rural panel component. ► The effect on expenditure of Village Fund loans is strongest at the lower quantiles, and in this sense is “pro-poor”.

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Author(s): Muneesh Kapur

This paper focuses on modeling and forecasting inflation in India using an augmented Phillips curve framework. Both demand and supply factors are seen as drivers of inflation. Demand conditions are found to have a stronger impact on non-food manufactured products (NFMP) inflation vis-a-vis headline wholesale price inflation; moreover, NFMP inflation is found to be more persistent than headline inflation. Both these findings support the use of NFMP inflation as a core measure of inflation. But, the impact of global non-fuel commodities on NFMP inflation is found to be substantial. Inflation in non-fuel commodities is seen as a more important driver of domestic inflation rather than fuel inflation. The exchange rate pass-through coefficient is found to be modest, but nonetheless sharp depreciation in a short period of time can add to inflationary pressures. The estimated equations show a satisfactory in sample as well as out-of-sample performance based on dynamic simulations. Nonetheless, forecasting challenges emanate from volatility in international oil and other commodity prices and domestic food supply dynamics.
Highlights ► We model inflation in India using an augmented Phillips curve framework. ► Impact of demand conditions is stronger on core inflation than headline inflation. ► Impact of global commodity inflation on NFMP inflation is also substantial. ► Sharp depreciation is inflationary, even with a modest pass-through coefficient. ► Forecasting challenges emanate from volatility in commodity and food prices.

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Author(s): Eric D. Ramstetter , Phan Minh Ngoc

After controlling for firm-level factor intensities and scale, and industry-level concentration, total factor productivity differentials between MNC (multinational corporation) joint ventures or SOEs (state-owned enterprises) and private firms were usually positive and statistically significant in 2001–2006. Differentials between wholly foreign MNCs and private firms were usually positive and significant in a lagged specification but not in a contemporaneous one. Estimates of productivity spillovers from SOEs and MNCs to private firms and the productivity effects of concentration tended to be insignificant statistically. Substantial variation of estimates among industries and time periods suggests that combining heterogeneous industries or time periods biases productivity estimates.
Highlights ► MNC joint ventures and SOEs were often more productive than private firms. ► Wholly foreign-MNC-to-private productivity differentials were often insignificant. ► Productivity effects of concentration were often insignificant. ► Productivity spillovers from MNCs or SOEs to private firms were often insignificant. ► Estimates varied substantially among industries and time periods.

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Author(s): Saumitra N. Bhaduri , Siddharth D. Mahapatra

The paper presents an alternative approach to test herding behavior in the Indian equity market. In contrast to the conventional test methodologies, based on return dispersions among a group of securities, this paper uses symmetric properties of the cross-sectional return distribution to identify herding. Using this alternative approach, we find evidence of herding in the Indian equity market during the sample period which tends to be more pronounced during the 2007 crash. The paper also finds that the rate of increase in security return dispersion is relatively lower in the up market compared to down market days. This finding is contrary to the directional asymmetry documented by McQueen et al. (1996).
Highlights ► The paper presents an alternative approach to test herding behavior in the Indian equity market using symmetric properties of the cross-sectional return distribution. ► Using the proposed approach, the paper finds evidence of herding in the Indian equity market during the sample period. ► We also observe pronounced herding during the 2007 crash in the Indian equity market. ► Finally, the paper also reports that the rate of increase in security return dispersion is relatively lower in the up market than in the down market days.

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Author(s): Bernd Hardeweg , Andreas Wagener , Hermann Waibel

Vulnerability to poverty is an important social indicator of well-being. Yet, comparisons of vulnerability over time or space lack robustness as long as they are based on single measures or use specific poverty lines. We demonstrate that a distributional analysis, based on stochastic dominance orders, can help. Using data from six rural provinces of Thailand and Vietnam, we establish cumulative distribution functions for income and consumption at the provincial level and show how they can provide ethically robust vulnerability comparisons.
Highlights ► Vulnerability to poverty measures the risk of falling into, or staying in, consumption or income poverty in the future. ► The theory of stochastic dominance orders provides tools to establish ethically robust vulnerability comparisons. ► The vulnerability to poverty in six rural provinces in Thailand and Vietnam is compared. ► In the poorest provinces, vulnerability to poverty is unambiguously larger in Vietnam than in Thailand.

Publication date: April 2013
Source:Journal of Asian Economics, Volume 25

Author(s): Yonghyup Oh

Publication date: Available online 19 March 2013
Source:Journal of Asian Economics

Author(s): Atsushi Kato , Takahiro Sato

We examine the effects of the threats to property rights on the economic performance of the manufacturing sector in Indian states. We constructed indices of the threats using data on crime against property rights. In our analysis, we correct for the problem of underreporting of crimes in official crime data. The results of our instrumental variable estimation show that not only threats to private property but also to contracts adversely affect the performance of the manufacturing sector in India. We also extend our basic model to examine the effects of kidnapping and the scale economies of property rights protection.

Publication date: Available online 5 March 2013
Source:Journal of Asian Economics

Author(s): Joakim Westerlund , Jean-Pierre Urbain

Practitioners are generally well aware of the fact that most standard approaches for estimation and inference in panel data regressions are based on assuming that the cross-sectional units are independent of each other, an assumption that is surely mistaken in applications, especially in macroeconomics and finance. Yet, applications involving anything but these standard approaches are very rare. The current paper can be seen as a reaction to this. The purpose is to point to some of the recent advances in the area of factor-augmented panel regressions, and to also provide some guidance regarding their implementation.
Highlights ► Most applications involving panel data regressions are based on OLS. ► Yet, OLS is known not to be robust to cross-section dependence. ► This paper point to some of the recent advances in the area of factor-augmented panel regressions. ► The implementation of these novel approaches is given a detailed treatment.

Publication date: February 2013
Source:Journal of Asian Economics, Volume 24

Publication date: February 2013
Source:Journal of Asian Economics, Volume 24

Author(s): Gabriella Berloffa , Francesca Modena

Using the Indonesian Family Life Survey, this study investigates whether Indonesian farmers respond differently to income shocks (crop loss) depending on the level of their asset ownership, and whether their responses are aimed at preserving consumption levels or at accumulating assets. We consider a framework in which assets contribute directly to the income generation process. In this context, the need to accumulate assets to ensure future income may lead poor farmers to behave quite differently in terms of both their responses to shocks and their consumption decisions. Our results suggest that while non-poor farmers smooth consumption relative to income, poor households use labor supply to compensate the income loss and, on average, they save half of this extra income. These results confirm the importance of savings for poor households, and highlight a crucial role for policies that support savings or, more precisely, the accumulation of productive assets.
Highlights ► Farmers respond differently to crop loss depending on the level of asset ownership. ► We test this assumption using Indonesian Family Life Survey data. ► Medium and large farms smooth consumption relative to income. ► Poor farms tend to adopt asset smoothing strategies. ► Poor households save half of their current income.

Publication date: February 2013
Source:Journal of Asian Economics, Volume 24

Author(s): Piriya Pholphirul

Do immigrant workers fill in job vacancies and promote employment dynamics? Using Thailand's firm-surveyed data, this paper investigates the challenges experience by firms employing immigrant workers and how immigrants help to fill job vacancies. Descriptive analysis shows that Thai firms do not have much difficulty employing immigrant workers, who come mostly from neighboring countries. Our regressions shows that, by analyzing firm-level characteristics, firms employing immigrant workers tend to be more labor intensive, use computers or other technologies less in production, are recently established, and employ high proportions of low educated workers. Firms having job vacancies in either skilled or unskilled positions and losing production days due to slowdown and stoppage of workers will tend to employ more immigrant workers in order to fill those vacancies and smooth out its production. The impacts of job vacancies on the demand of immigrant workers was found to be stronger among firms located in non-border areas where immigrants tend to move away from bordering provinces to larger provinces where there are better job opportunities. Labor cost concerns, either wage cost or fringe benefit costs, also force firms to employ more migrants in order to maintain their cost competitiveness. By using firm-level panel dataset, firms employing migrant workers in the past seem to realize the benefits from employing more migrants today. The results pose challenges to migration management policies that aim to harmonize the demand for labor in short-term vis-a-vis long-term development.
Highlights ► Using Thailand's firm-survey data, this paper investigates the challenges experienced by firms employing immigrant workers and how immigrants help to fill job vacancies. ► Firms having job vacancies in either skilled or unskilled positions and losing production days due to slowdowns and stoppage of workers tend to employ more immigrant workers in order to fill those vacancies and smooth out their production. ► Labor cost concerns, either wage costs or fringe benefit costs, also force firms to employ more migrants in order to maintain their cost competitiveness.

Publication date: February 2013
Source:Journal of Asian Economics, Volume 24

Author(s): Richard Grabowski

Many developing countries have chosen to use a variety of policy instruments to transfer resources out of agriculture and to the manufacturing and, in some countries, the service sector. It will be argued in this paper that such policies slow structural change, create incentives for capital intensive production in non-agricultural sectors, and slow the process of technical innovation in agriculture. These arguments will be illustrated by examining the recent growth experience in India.
Highlights ► Agricultural distortions influence structural change in terms of employment. ► This paper examines the impact of policies which discriminate against agriculture in India. ► These policies not only slow structural change (in terms of employment), but they also slow technical innovation in agriculture. ► Thus structural change in India has been slowed.

Publication date: February 2013
Source:Journal of Asian Economics, Volume 24

Author(s): Carolina Osorio , D. Filiz Unsal

The perception that Asia's inflation dynamics are driven by idiosyncratic supply shocks implies, as a corollary, a limited scope for policy responses to inflationary pressures. However, Asia's fast growth and integration with the global economy in the last couple of decades suggest that the drivers of inflation may have changed. This paper presents a quantitative analysis of inflation dynamics in Asia using a Global VAR (GVAR) model, which explicitly incorporates trade and financial linkages among economies, as well as the role of regional and global inflationary spillovers. Our results suggest that over the past two decades, the main drivers of inflation in Asia have been monetary and supply shocks; but that, in recent years, the contribution of these shocks to the region's inflation has fallen. Domestic demand pressures, however, have played a larger role in driving inflation in Asia over the last decade. Moreover, economies in the region are exposed to notable inflation spillovers from China, both directly from higher imported goods prices and indirectly through higher commodity prices.
Highlights ► The perception that inflation dynamics in Asia are driven by supply shocks implies a limited role for monetary policy. ► The region's economic developments over the last two decades suggest that the drivers of inflation may have changed. ► We use a Global VAR to analyze inflation dynamics in Asia, incorporating trade and financial linkages among economies. ► Monetary and supply shocks have been the main drivers of inflation in Asia over the past two decades. ► The role of demand pressures has been recently increasing; and inflation spillovers from China to the region are sizable.

Publication date: February 2013
Source:Journal of Asian Economics, Volume 24

Author(s): Dong Jin Shin , Brian H.S. Kim

The Korean government consolidated several banks following the Asian Financial Crisis of 1997–1998 to stabilize the financial market and to improve international competitiveness. This process has brought sound capital reserves, assets and profitability to the banking industry. However, due to the resulting increase in market concentration, this process has also produced concerns about the monopolistic and oligopolistic power of the banks. Recently, the growing concern within the government is the weakening of bank competition due to the sharp increase in market concentration. This study reviews and examines the status of bank consolidation and the competitive structure of the banking industry. The degree of competitiveness in the banking industry is analyzed using the Panzar and Rosse model with a non-structural approach and data from 1992 to 2007 (before the beginning of the 2008–2009 Global Financial Crisis). This time span is divided into a pre- and a post-bank consolidation period. The estimation results indicate that monopolistic competition in the market exists but that the competitiveness of the banks has improved with the increased market concentration. This finding contradicts previous beliefs regarding the increased risk and lower competition derived from a concentrated financial system.
Highlights ► This paper examines the competitiveness of the Korean banking industry after consolidation. ► It analyzes the degree of competition within an improved Panzar and Rosse model, which uses cross-sectional data to assess the competitive behavior of banks. ► H-statistics results reveal the existence of monopolistic competition in the market. ► There is evidence of improvements in bank competition and profitability after consolidation. ► These results contradict the belief of increased risk and lower competition within this concentrated system.