Asia

An empirical analysis of China's equilibrium exchange rate: A co-integration approach

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: December 2013
Source:Journal of Asian Economics, Volume 29

Author(s): Christopher Gan , Bert Ward , Su Ting Ting , David A. Cohen

This paper estimates time specific values for China's long-run equilibrium exchange rate and develops measures of the direction and extent of misalignment based on a reduced-form real effective exchange rate (REER) model. An appropriately specified long-run equilibrium model is estimated and tested following Johansen and Juselius (1990) procedures, which is then used to construct an estimated time path for long-run equilibrium exchange rate values. Unit root tests indicated that each series can be considered as I(1) and that there was one cointegrating relationship linking the RMB series with its “fundamentals” – openness, money supply, productivity and government spending – with long-run elasticities of (0.41), (0.97), (0.51) and (0.75), respectively. The estimated error-correction model of REER determination showed that during China's latest exchange rate regime (from 2005:Q3) the RMB was undervalued by an average of 6.7 percent, which is modest compared to related studies. Estimation of the associated short-run error correction model shows that the error correction term has a statistically significant value of 0.85, implying that the actual real effective exchange rates would converge relatively quickly (just over one quarter, on average) towards their long-run equilibrium level in the absence of central bank intervention.





Categories: Asia, Economics

Can Asia sustain an export-led growth strategy in the aftermath of the global crisis? Exploring a neglected aspect

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: December 2013
Source:Journal of Asian Economics, Volume 29

Author(s): Gonzalo Hernandez Jimenez , Arslan Razmi

Employing panel data for Asian countries to distinguish between different kinds of export- and tradable-led growth, we find that the proportion of a country's manufactured exports that is destined for industrialized countries, a variable largely ignored by existing studies, is robustly associated with growth. This finding has crucial implications given the expected deceleration of industrialized country import growth in the coming years. Most importantly, and contrary to some recent studies, prospects for continued growth, now centered on domestic tradable consumption or on developing countries as markets, may be limited. South–South trade may not be a good substitute for South–North trade.





Categories: Asia, Economics

Sources of spatial welfare disparities in Indonesia: Household endowments or returns?

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: December 2013
Source:Journal of Asian Economics, Volume 29

Author(s): Emmanuel Skoufias , Sergio Olivieri

This article investigates (i) the extent to which the differences in the standard of living among districts in Indonesia are due to differences in the marginal welfare gains (returns) associated with household mobile endowments or differences in household endowments themselves; and (ii) whether the current allocation of fiscal expenditures by the central authorities is related to the main determinants of the spatial disparities in welfare among districts. Differences in the returns to household mobile characteristics are found to be the primary explanation of the welfare differences. The allocation of fiscal transfers to districts is found to be based on “needs” defined as low returns to household mobile endowments. This also suggests that the design of the fiscal transfer system is consistent with promoting the opportunities for welfare across districts as opposed to equalizing the level of welfare itself. Finally, the marginal welfare gains of most household mobile endowments are found to be higher in districts with more roads.





Categories: Asia, Economics

The determinants of Australian household debt: A macro level study

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: December 2013
Source:Journal of Asian Economics, Volume 29

Author(s): Xianming Meng , Nam T. Hoang , Mahinda Siriwardana

This paper employs a cointegrated Vector Autoregression (CVAR) model to explore the determinants of Australian household debt. The results show that housing prices, GDP and the population in the economy have a positive effect on household borrowing. Meanwhile, interest rates, the unemployment rate, the number of new dwellings and inflation are found to have a negative effect on Australian household debt. Of these, interest rates are the most significant. Based on these results, it is judicious to rein in household debt during economic booms through monitoring and intervening in the assets market and using monetary policy in a timely, comprehensive, and careful manner.





Categories: Asia, Economics

Bank opacity, intermediation cost and globalization: Evidence from a sample of publicly traded banks in Asia

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: December 2013
Source:Journal of Asian Economics, Volume 29

Author(s): Wahyoe Soedarmono , Amine Tarazi

This paper examines the relationship between opacity and the cost of intermediation in Asian banks. Using a sample of publicly traded commercial banks from 2002 to 2008, our empirical results show that higher opacity is associated with a lower intermediation cost in banking. Hence, bank managers in their efforts to overcome asymmetric information issues and to improve transparency tend to offset the higher cost of acquiring and disclosing information by increasing the cost of intermediation for entrepreneurs. Moreover, a deeper look at the country level indicates that the negative link between opacity and the cost of intermediation is reversed as globalization increases. Greater globalization therefore outweighs managerial entrenchment behavior to preserve bank opacity. Our findings highlight that bank opacity issues are even more costly in countries with higher globalization.





Categories: Asia, Economics

Family size, household shocks and chronic and transient poverty in the Philippines

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: December 2013
Source:Journal of Asian Economics, Volume 29

Author(s): Connie Bayudan-Dacuycuy , Joseph Anthony Lim

This research is one of the few attempts to analyze chronic and transient poverty in the Philippines. Results indicate that poverty in the Philippines is largely comprised of chronic poverty with households in rural areas and Mindanao regions being the most affected. Using quantile regressions, results show that both chronic and transient poverty are affected by negative shocks to households. Shocks in the labor market such as job loss or income reduction affect chronic poverty while natural disasters such as droughts affect transient poverty. Results also indicate that a higher dependency burden due to a large number of younger children positively affects chronic poverty but not transient poverty. Policy suggestions to lower both types of poverty in the Philippine context are provided.





Categories: Asia, Economics

Editorial Board

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2013
Source:Journal of Asian Economics, Volume 28









Categories: Asia, Economics

ASEAN Regional Cooperation on Competition Policy

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: Available online 8 October 2014
Source:Journal of Asian Economics

Author(s): Cassey Lee , Yoshifumi Fukunaga

ASEAN member states intend to establish the ASEAN Community by 2015. A key component of this goal is the formation of the ASEAN Economic Community (AEC). The AEC Blueprint was initiated to facilitate and monitor the implementation of the AEC during the period 2008-2015. Competition policy will play an important role in the achievement of the AEC. There has been significant progress in regional cooperation to achieve the competition policy targets listed in the AEC Blueprint. Even though only half of AMSs have implemented competition laws, regional cooperation in this area has been fairly strong. The main emphasis has been on publishing regional guidelines and a handbook on competition policy in ASEAN as well as capacity building activities. There needs to be a renewed impetus to implement national competition laws in AMSs that have not done so. There also remain significant opportunities for enforcement cooperation and pooling of resources for capacity building in competition policy in the region.





Categories: Asia, Economics

The Impact of AFTA on Intra-AFTA Trade

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: Available online 8 October 2014
Source:Journal of Asian Economics

Author(s): Misa Okabe , Shujiro Urata

ASEAN countries have liberalized intra-ASEAN trade over the last 20 years by establishing the ASEAN Free Trade Area (AFTA). This paper aims to examine the impact of trade liberalization under AFTA on intra-ASEAN trade. By applying a gravity model, we find positive and significant trade creation effects from the tariff elimination for a wide range of products. In addition, the analysis reveals that the elasticity of tariff reduction on imports tends to be much larger than that on exports. Trade creation effects for the new ASEAN members are relatively small compared to those for the old members. Our results show that AFTA has been successful in promoting intra-AFTA trade, while we argue that further expansion may be achieved by increasing the use of AFTA and by reducing/removing non-tariff measures (NTMs) through such ways as improving customs procedures and harmonizing/mutually recognizing product standards.





Categories: Asia, Economics

Impact of Liberalization and Improved Connectivity and Facilitation in ASEAN

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: Available online 6 October 2014
Source:Journal of Asian Economics

Author(s): Ken Itakura

This study attempts to evaluate the potential economic effects of liberalization and improved connectivity and facilitation of trade in goods and services among the ASEAN member states (AMSs) by applying economy-wide simulation analysis based on a recursively dynamic computable general equilibrium (CGE) model. We conduct a set of simulations to capture the effects of establishing free trade agreements (FTAs) in which the AMSs participate. Three key components affecting the impacts of FTAs are reduction of tariffs on goods, lowering of barriers to trade in services, and saving time-costs arising from logistics. Simulation results revealed that reducing trade barriers has a significantly positive impact on economic welfare. Although there are differences in the magnitude of positive contributions to welfare, all of the FTAs in which the AMSs participate tend to raise welfare. Among the FTAs examined in this study, the Regional Comprehensive Economic Partnership (RCEP) leads to the largest positive effects on real GDP for most of the AMSs.





Categories: Asia, Economics

Does AFAS have Bite? Comparing Services Trade Commitments with Actual Practice

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: Available online 6 October 2014
Source:Journal of Asian Economics

Author(s): Philippa Dee

The paper reviews the commitments achieved so far in selected sectors under the ASEAN Framework Agreement on Services (AFAS), and compares these commitments with actual regulatory practice. The aim is to identify whether significant services trade liberalization has been achieved in reality, rather than merely on paper. The paper also identifies the sticking points, and assesses whether current services trade restrictions remain uncommitted because of sectoral sensitivities, features of the negotiating framework, or gaps in the broader regulatory environment. In each of the sectors examined, there are examples of all three problems. The paper concludes with suggestions for additional directions that could be taken and negotiating strategies that could be employed to deal with these problems, and thus accelerate the reform process towards an ASEAN Economic Community.





Categories: Asia, Economics

Editorial Board

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34









Categories: Asia, Economics

The Indonesian macroeconomy and the yield curve: A dynamic latent factor approach

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): Leslie Djuranovik

We develop a fine representation of the term structure of interest rates in Indonesia and create a link between the yield curve and macroeconomic fundamentals. We construct a state-space representation of the yield curve as a function of three time-varying parameters: level, slope, and curvature factors. The model is then expanded to include three macroeconomic variables: real activity, inflation, and interest rates. We find that the dynamic latent factor model provides a very good fit to characterise the Indonesian yield curve in terms of the statistical properties for each maturity, and in terms of the properties of three latent yield-curve factors. With regards to the relationship to the macroeconomy, we find that there is a large amount of idiosyncratic variation in the yield curve movements. Therefore, macroeconomic variables can only explain small dynamics in the yield curve.





Categories: Asia, Economics

Inflation dynamics and monetary policy transmission in Vietnam and emerging Asia

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): Rina Bhattacharya

This paper provides an overview of inflation developments in Vietnam in the years following the doi moi reforms, and uses empirical analysis to answer two key questions: (i) what are the key drivers of inflation in Vietnam, and what role does monetary policy play? and (ii) why has inflation in Vietnam been persistently higher than in most other emerging market economies in the region? It focuses on understanding the monetary policy transmission mechanism in Vietnam, and in understanding the extent to which monetary policy can explain why inflation in Vietnam has been higher than in other Asian emerging markets over the past decade.





Categories: Asia, Economics

Is devaluation expansionary or contractionary: Evidence based on vector autoregression with sign restrictions

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): Lian An , Gil Kim , Xiaomei Ren

The purpose of the paper is to examine the impact of real exchange rate changes – real devaluation or real depreciation – on outputs in 16 countries that fall within one of the three groups: Latin American countries, Asian countries, and non-G3 developed countries. For the first time in the contractionary devaluation literature, the analysis is based on a Vector Autoregression (VAR) model with sign restrictions method by Uhlig (2005) and Fry and Pagan (2011). The exchange rate shock is identified by imposing restrictions on the signs of impulse responses for a small subset of variables. The findings are as follows: (1) whether output increases after a real devaluation or not has little to do with whether the current account improves or not; (2) Latin American countries are quite homogenous in that the current account generally improves while output decreases after real devaluation; and (3) contractionary devaluation could happen in developed countries as well as in developing countries.





Categories: Asia, Economics

Net foreign assets and macroeconomic volatility

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): W.M. Chia , Y. Jinjarak , P. Rana , T. Xie

This study analyses the co-movements of net foreign asset accumulation, consumption, real exchange rate, and real interest rate in a cross section of countries. Our sample covers both industrial and developing economies, spanning 1981–2010 period. We find that the accumulation of net foreign assets is associated with increasing consumption and real exchange rate appreciation. In a cross section of countries, when a country increases its net foreign assets to GDP ratio by a one-standard deviation, consumption to GDP increases by 0.02% per year and real exchange rate appreciates by 2% per year. Consumption to GDP responds more positively to net foreign asset accumulation in G7 countries, +0.1 to +0.2% per year, while the response is smaller and negative in developing countries reporting a −0.02% per year. The real exchange rate appreciation, however, is about +3% per year in developing countries and only about +0.2% per year in OECD countries.





Categories: Asia, Economics

Returns to education among entrepreneurs in Bangladesh

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): Ivar Kolstad , Arne Wiig , Khondaker Golam Moazzem

This article estimates returns to education among entrepreneurs in Bangladesh, using unique survey data from 2012. Our main instrument for education is the education of the father of the entrepreneur, and we control for sibling education in order to take out the potential effect of father education on productivity and profitability. The results suggest a return to education in the order of 11 per cent per year of education. Using the education of the mother as an alternative instrument, we find evidence of heterogeneous returns to education among entrepreneurs. Compared to our main instrument, the education of mothers appears to affect education choices among individuals with relatively higher participation probabilities in education, where returns to education are lower.





Categories: Asia, Economics

Financial crises, Asian stock indices, and current accounts: An Asian-U.S. comparative study

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): David Y. Chen , Tongzhe Li

This paper investigates the effects of financial crises-based exchange rate, real interest rate, and personal consumption expenditure on stock market indices and balances of current account in four Asian countries/areas, and the U.S. from 1997 to 2010. Results obtained from Sims's first-order DSGE representation suggest that two policy variables – changes in the exchange rate and changes in the real interest rate lagged by one quarter – act as stabilizers for contemporaneous changes in stock indices for Thailand, Malaysia, and the U.S., but as destabilizers for Taiwan and Hong Kong. However, changes in personal consumption expenditure lagged by one quarter only play a destabilizing role in Hong Kong. For contemporaneous changes in the current account balance, all three policy variables become destabilizers for all five countries except the one-quarter lagged change in real interest rate, which acts as a stabilizer in Malaysia.





Categories: Asia, Economics

“Flying geese” in China: The textile and apparel industry's pattern of migration

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): Jianqing Ruan , Xiaobo Zhang

China has large regional variations in both factor endowments and levels of economic development. In principle, some industrial enterprises will relocate to the inland regions from the coastal regions to take advantage of lower wage rates and land prices, provided that the regions are different enough. However, few studies have empirically tested whether this kind of “flying geese” pattern of domestic industrial relocation has occurred on the ground or not. Using data from the textile and apparel industry from 1998 to 2011, this paper shows the existence of the “flying geese” pattern of industrial relocation. Data show that before around 2005, the textile and apparel industry was clustered in the eastern region of China, but it has since shifted toward the central and western regions.





Categories: Asia, Economics

Preference shocks, international frictions, and international business cycles

Journal of Asian Economics - Sun, 10/12/2014 - 11:23
Publication date: October 2014
Source:Journal of Asian Economics, Volume 34

Author(s): Hideaki Hirata

Replicating the degree of cross-country comovements of macroeconomic aggregates, dynamics of prices and quantities of international trade, and the behavior of consumption and labor remains an important challenge in international business cycle literature. This paper incorporates preference shocks into a standard two-country model in which there exist international frictions, such as costs of transportation and restrictions to international asset trade. Country-specific preference shocks that generate fluctuations in each country's consumption and labor solve the puzzles, except for the discrepancy between theory and data regarding international trade variables. The presence or absence of international frictions plays a limited role in solving the puzzles.





Categories: Asia, Economics
Syndicate content

FutureofUSChinaTrade.com is a program of The Kearny Alliance