|
on South East Asia |
| By: | Joshua Aizenman (University of California, Santa Cruz); Yeonho Lee (Chungbuk National University, Korea); Yeongseop Rhee (Sookmyung Women's University, Korea) |
| Abstract: | This paper characterizes the precautionary demand for international reserves driven by the attempt to reduce the incidence of costly output decline induced by sudden reversal of short-term capital flows. It validates the main predictions of the precautionary approach by investigating changes in the patterns of international reserves in Korea in the aftermath of the 1997-8 crisis. This crisis provides an interesting case study, especially because of the rapid rise in Korea's financial integration in the aftermath of the East- Asian crisis, where foreigners' shareholding has increased to 40% of total Korean market capitalization. We show that the crisis led to structural change in the hoarding of international reserves, and that the Korean monetary authority gives much greater attention to a broader notion of 'hot money,' inclusive of short-term debt and foreigners' shareholding. |
| Keywords: | short-term capital flows, foreigners' shareholding, precautionary demand for international reserves, |
| Date: | 2004–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:scciec:1032&r=sea |
| By: | Terrie Carolan; Nirvikar Singh (University of California, Santa Cruz) |
| Abstract: | We examine the composition of bilateral trade between the United States and each of eight Asian Pacific economies from 1962 to 1992. Two complementary time series analyses of individual commodities at the SITC four-digit level indicate that significant change occurred in trade composition during this period. For the eight bilateral trade relationships, commodities representing from fifty to seventy percent of 1992 dollar trade volume have shown statistically significant change in the magnitude and, in some cases, in the direction of net trade balance, over the thirty-year period. Results support the conclusion that changes in trade patterns in both low-tech industries, such as textiles and clothing, and more high-tech industries, such as electronic parts and electronic goods were important in these so-called Asian tigers as their economies advanced. |
| Keywords: | international trade flows, time series, ADF, KPSS, trends, economic development, |
| Date: | 2004–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:scciec:1033&r=sea |
| By: | Rasmus Fatum (University of Alberta; University of California, Santa Cruz); Michael Hutchison (University of California Santa Cruz Economics Department) |
| Abstract: | Japanese official intervention in the foreign exchange market is of by far the largest magnitude in the world, despite little or no evidence that it is effective in moving exchange rates. Up until recently, however, official data on intervention has not been available for Japan. This paper investigates the effectiveness of intervention using recently published official daily data and an event study methodology. The event study better fits the stochastic properties of intervention and exchange rate data, i.e. intense and sporadic bursts of intervention activity juxtaposed against a yen/dollar rate continuously changing, than standard time-series approaches. Focusing on daily Japanese and US official intervention operations, we identify separate intervention "episodes" and analyze the subsequent effect on the exchange rate. Using the non-parametric sign test and matched-sample test, we find strong evidence that sterilized intervention systemically affects the exchange rate in the short-run (less than one month). This result holds even when intervention is not associated with (simultaneous) interest rate changes, whether or not intervention is "secret" (in the sense of no official reports or rumors of intervention reported over the newswires), and against other robustness checks. Large-scale (amounts over $1 billion) intervention, coordinated with the Bank of Japan and the Federal Reserve working in unison, give the highest success rate. During the period that the Bank of Japan has reduced interbank rates to 0.5 percent and below (from September 1995), however, only one intervention operation has been coordinated with the Fed and the success rate has been correspondingly low. |
| Date: | 2003–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:scciec:1034&r=sea |
| By: | Michael Hutchison (University of California Santa Cruz Economics Department); Ilan Noy (University of Hawaii, Manoa. Department of Economics) |
| Abstract: | Sudden Stops are the simultaneous occurrence of a currency/balance of payments crisis with a reversal in capital flows (Calvo, 1998). We investigate the output effects of financial crises in emerging markets, focusing on whether sudden-stop crises are a unique phenomenon and whether they entail an especially large and abrupt pattern of output collapse (a "Mexican wave"). Despite an emerging theoretical literature on Sudden Stops, empirical work to date has not precisely identified their occurrences nor measured their subsequent output effects in broad samples. Analysis of Sudden Stops may provide the key to understanding why some currency/balance of payments crises entail very large output losses, while others are frequently followed by expansions. Using a panel data set over the 1975-97 period and covering 24 emerging-market economies, we distinguish between the output effects of currency crises, capital inflow reversals, and sudden-stop crises. We find that sudden-stop crises have a large negative, but short-lived, impact on output growth over and above that found with currency crises. A currency crisis typically reduces output by about 2-3 percent, while a Sudden Stop reduces output by an additional 6-8 percent in the year of the crisis. The cumulative output loss of a Sudden Stop is even larger, around 13-15 percent over a three-year period. Our model estimates correspond closely to the output dynamics of the 'Mexican wave' (such as seen in Mexico in 1995, Turkey in 1994 and elsewhere), and out-of-sample predictions of the model explain well the sudden (and seemingly unexpected) collapse in output associated with the 1997-98 Asian Crisis. The empirical results are robust to alternative model specifications, lag structures and using estimation procedures (IV and GMM) that correct for bias associated with estimation of dynamic panel models with country-specific effects. Our study supports the hypothesis that sudden stops have a much larger adverse effect on output than other forms of currency attack, and explains the wide divergence in economies' performances following international financial crises. Establishing this empirical regularity for emerging market economies is the first step in empirically identifying the transmission mechanism through which sudden stops have such large output effects. |
| Date: | 2004–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:scciec:1035&r=sea |
| By: | Joshua Aizenman (University of California, Santa Cruz); Brian Pinto (World Bank); Artur Radziwill (Center for Social and Economic Research. Warsaw, Poland) |
| Abstract: | This paper proposes a new method for measuring the degree to which the domestic capital stock is self-financed. The main idea is to use the national accounts to construct a self-financing ratio, indicating what would have been the autarky stock of tangible capital supported by actual past domestic saving, relative to the actual stock of capital. We use the constructed measure of self-financing to evaluate the impact of the growing global financial integration on the sources of financing domestic capital stocks in developing countries. On average, 90% of the stock of capital in developing countries is self financed, and this fraction was surprisingly stable throughout the 1990s. The greater integration of financial markets has not changed the dispersion of self-financing rates, and the correlation between changes in de-facto financial integration and changes in self-financing ratios is statistically insignificant. There is no evidence of any "growth bonus" associated with increasing the financing share of foreign savings. In fact, the evidence suggests the opposite: throughout the 1990s, countries with higher selffinancing ratios grew significantly faster than countries with low self-financing ratios. This result persists even after controlling growth for the quality of institutions. We also find that higher volatility of the self-financing ratios is associated with lower growth rates, and that better institutions are associated with lower volatility of the self-financing ratios. These findings are consistent with the notion that financial integration may have facilitated diversification of assets and liabilities, but failed to offer new net sources of financing capital in developing countries. |
| Keywords: | financial integration, self-financing, diversification, saving, investment, |
| Date: | 2004–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:scciec:1036&r=sea |
| By: | Reuven Glick (Federal Reserve Bk. of San Francisco); Xueyan Guo (University of California Santa Cruz Economics Department); Michael Hutchison (University of California Santa Cruz Economics Department) |
| Abstract: | Are countries with unregulated capital flows more vulnerable to currency crises? Efforts to answer this question properly must control for "self selection" bias since countries with liberalized capital accounts may also have more sound economic policies and institutions that make them less likely to experience crises. We employ a matching and propensity score methodology to address this issue in a panel analysis of developing countries. Our results suggest that, after controlling for sample selection bias, countries with liberalized capital accounts experience a lower likelihood of currency crises. That is, when two countries have the same likelihood of allowing free movement of capital (based on historical evidence and a very similar set of economic and political characteristics)and one country imposes controls and the other does not-- the country without controls has a lower likelihood of experiencing a currency crisis. This result is at odds with the conventional wisdom and suggests that the benefits of capital market liberalization for external stability are substantial. |
| Date: | 2004–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:scciec:1037&r=sea |
| By: | Terrie Carolan; Nirvikar Singh (University of California, Santa Cruz) |
| Abstract: | We examine the composition of bilateral trade between the United States and each of eight Asian Pacific economies from 1962 to 1992. Two complementary time series analyses of individual commodities at the SITC four-digit level indicate that significant change occurred in trade composition during this period. For the eight bilateral trade relationships, commodities representing from fifty to seventy percent of 1992 dollar trade volume have shown statistically significant change in the magnitude and, in some cases, in the direction of net trade balance, over the thirty-year period. Results support the conclusion that changes in trade patterns in both low-tech industries, such as textiles and clothing, and more high-tech industries, such as electronic parts and electronic goods were important in these so-called Asian tigers as their economies advanced. |
| Keywords: | international trade flows, time series, ADF, KPSS, trends, economic development, |
| Date: | 2004–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1010&r=sea |
| By: | Joshua Aizenman (University of California, Santa Cruz); Yeonho Lee (Chungbuk National University, Korea); Yeongseop Rhee (Sookmyung WomenÂ's University, Korea) |
| Abstract: | This paper characterizes the precautionary demand for international reserves driven by the attempt to reduce the incidence of costly output decline induced by sudden reversal of short-term capital flows. It validates the main predictions of the precautionary approach by investigating changes in the patterns of international reserves in Korea in the aftermath of the 1997-8 crisis. This crisis provides an interesting case study, especially because of the rapid rise in Korea's financial integration in the aftermath of the East- Asian crisis, where foreigners' shareholding has increased to 40% of total Korean market capitalization. We show that the crisis led to structural change in the hoarding of international reserves, and that the Korean monetary authority gives much greater attention to a broader notion of 'hot money,' inclusive of short-term debt and foreigners' shareholding. |
| Keywords: | short-term capital flows, foreigners' shareholding, precautionary demand for international reserves, |
| Date: | 2004–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1012&r=sea |
| By: | Robert Dekle (University of Southern California); Kenneth Kletzer (University of California Santa Cruz) |
| Abstract: | An endogenous growth model with financial intermediation is used to show how public deposit insurance and weak prudential regulation can lead to banking crises and permanent declines in economic growth. The impact of regulatory forbearance on investment, saving and asset price dynamics under perfect foresight are derived in the model. The assumptions of the theoretical model are based on essential features of the Japanese financial system and its regulation. The model demonstrates how banking and growth crises can evolve under perfect foresight. The dynamics for economic aggregates and asset prices predicted by the model are shown to be generally consistent with the experience of the Japanese economy and financial system through the 1990s. We also test our maintained hypothesis of rational expectations using asset price data for Japan over the 1980s and 1990s. An implication of our analysis is that delaying the resolution of banking crises adversely affects future economic growth. |
| Date: | 2004–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1019&r=sea |
| By: | Rasmus Fatum (University of Alberta; University of California, Santa Cruz); Michael Hutchison (University of California Santa Cruz Economics Department) |
| Abstract: | Japanese official intervention in the foreign exchange market is of by far the largest magnitude in the world, despite little or no evidence that it is effective in moving exchange rates. Up until recently, however, official data on intervention has not been available for Japan. This paper investigates the effectiveness of intervention using recently published official daily data and an event study methodology. The event study better fits the stochastic properties of intervention and exchange rate data, i.e. intense and sporadic bursts of intervention activity juxtaposed against a yen/dollar rate continuously changing, than standard time-series approaches. Focusing on daily Japanese and US official intervention operations, we identify separate intervention "episodes" and analyze the subsequent effect on the exchange rate. Using the non-parametric sign test and matched-sample test, we find strong evidence that sterilized intervention systemically affects the exchange rate in the short-run (less than one month). This result holds even when intervention is not associated with (simultaneous) interest rate changes, whether or not intervention is "secret" (in the sense of no official reports or rumors of intervention reported over the newswires), and against other robustness checks. Large-scale (amounts over $1 billion) intervention, coordinated with the Bank of Japan and the Federal Reserve working in unison, give the highest success rate. During the period that the Bank of Japan has reduced interbank rates to 0.5 percent and below (from September 1995), however, only one intervention operation has been coordinated with the Fed and the success rate has been correspondingly low. |
| Date: | 2003–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1025&r=sea |
| By: | Yin-Wong Cheung (University of California, Santa Cruz); Menzie Chinn (University of Wisconsin, Madison); Eiji Fujii (University of Tsukuba, Japan) |
| Abstract: | The linkages between the People's Republic of China and the other Chinese economies of Hong Kong and Taiwan are assessed, and compared against those with Japan and the US. We first characterize the time series behavior of three criteria of integration, namely real interest parity, uncovered interest parity, and relative purchasing power parity. There is evidence that these parity conditions tend to hold over longer periods between the People's Republic of China and all other economies, although they do not hold instantaneously. Overall, the magnitude of deviations from the parity conditions is shrinking over time. Amongst all, however, Hong Kong exhibits indications of a more advanced level of integration with the mainland. We also find that evidence is surprisingly positive for integration with the US. We then turn to examining the determinants of the degree of integration. Regression results suggest that the degrees of financial and integration depend upon the extent of capital controls, foreign direct investment linkages as well as exchange rate volatility. |
| Keywords: | uncovered interest parity, real interest parity, purchasing power parity, exchange rates, capital mobility, market integration, |
| Date: | 2003–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1032&r=sea |
| By: | Yin-Wong Cheung (University of California, Santa Cruz); Menzie Chinn (University of Wisconsin, Madison); Antonio Garcia Pascual (International Monetary Fund) |
| Abstract: | Previous assessments of forecasting performance of exchange rate models have focused upon a narrow set of models typically of the 1970's vintage. The canonical papers in this literature are by Meese and Rogoff (1983, 1988), who examined monetary and portfolio balance models. Succeeding works by Mark (1995) and Chinn and Meese (1995) focused on similar models. In this paper we re-assess exchange rate prediction using a wider set of models that have been proposed in the last decade: interest rate parity, productivity based models, and a composite specification incorporating the real interest differential, portfolio balance and nontradables price channels. The performance of these models is compared against two reference specifications the purchasing power parity and the Dornbusch-Frankel sticky price monetary model. The models are estimated in error correction and first-difference specifications. Rather than estimating the cointegrating vector over the entire sample and treating it as part of the ex ante information set as is commonly done in the literature, we also update the cointegrating vector, thereby generating true ex ante forecasts. We examine model performance at various forecast horizons (1 quarter, 4 quarters, 20 quarters) using differing metrics (mean squared error, direction of change), as well as the "consistency" test of Cheung and Chinn (1998). No model consistently outperforms a random walk, by a mean squared error measure; however, along a direction-of-change dimension, certain structural models do outperform a random walk with statistical significance. Moreover, one finds that these forecasts are cointegrated with the actual values of exchange rates, although in a large number of cases, the elasticity of the forecasts with respect to the actual values is different from unity. Overall, model/specification/currency combinations that work well in one period will not necessarily work well in another period. |
| Keywords: | exchange rates, monetary model, productivity, interest rate parity, purchasing power parity, forecasting performance, |
| Date: | 2003–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1033&r=sea |
| By: | Yin-Wong Cheung (University of California, Santa Cruz); Menzie Chinn (University of Wisconsin, Madison); Antonio Garcia Pascual (International Monetary Fund) |
| Abstract: | Previous assessments of nominal exchange rate determination have focused upon a narrow set of models typically of the 1970's vintage, including monetary and portfolio balance models. In this paper we re-assess the in-sample fit and out-of-sample prediction of a wider set of models that have been proposed in the last decade, namely interest rate parity, productivity based models, and "behavioral equilibrium exchange rate" models. These models are compared against a benchmark model, the Dornbusch-Frankel sticky price monetary model. First, the parameter estimates of the models are compared against the theoretically predicted values. Second, we conduct an extensive out-of-sample forecasting exercise, using the last eight years of data to determine whether our in-sample conclusions hold up. We examine model performance at various forecast horizons (1 quarter, 4 quarters, 20 quarters) using differing metrics (mean squared error, direction of change), as well as the "consistency" test of Cheung and Chinn (1998). We find that no model fits the data particularly well, nor does any model consistently out-predict a random walk, even at long horizons. There is little correspondence between how well a model conforms to theoretical priors and how well the model performs in a prediction context. However, we do confirm previous findings that out-performance of a random walk is more likely at long horizons. |
| Keywords: | exchange rates, monetary model, productivity, interest rate parity, behavioral equilibrium exchange rate model, forecasting performance, |
| Date: | 2003–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1034&r=sea |
| By: | Yin-Wong Cheung (University of California, Santa Cruz) |
| Abstract: | The article examines the Hong Kong export performance. A standard export demand formulation is used as the benchmark. Then, we investigate the effects of real exchange rate volatility, "third" country competition, domestic wages, and costs of imports from China on export volume. The study models the Hong Kong domestic exports and re-exports separately, compares the performance of exports to the rest of the world, US and Japan, and uses destination-and-export-type specific unit value indexes to construct real exchange rates. It is found that Hong Kong export performance varies across export types and across destinations. In general, Hong Kong exports display mean-reverting dynamics, are positively influenced by foreign income, and are adversely affected by high value of its currency. The lagged export variable, foreign income, and real exchange rate provide most of the explanatory power. The other variables contribute only marginally in explaining the variability of Hong Kong exports. |
| Keywords: | Hong Kong Export Performance, |
| Date: | 2003–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1037&r=sea |
| By: | Yin-Wong Cheung (University of California, Santa Cruz); Menzie Chinn (University of Wisconsin, Madison); Eiji Fujii (University of Tsukuba, Japan) |
| Abstract: | The status of real and financial integration of China, Hong Kong, and Taiwan is investigated using monthly data on one-month interbank rates, exchange rates, and prices. Specifically, the degree of integration is assessed based on the empirical validity of real interest parity, uncovered interest parity, and relative purchasing power parity. There is evidence these parity conditions tend to hold over longer periods, although they do not hold instantaneously. Overall, the magnitude of deviations from the parity conditions is shrinking over time. In particular, China and Hong Kong appear to have experienced significant increases in integration during the sample period. It is also found that exchange rate variability plays a major role in determining the variability of deviations from these parity conditions. |
| Keywords: | uncovered interest parity, real interest parity, purchasing power parity, exchange rates, capital mobility, market integration, |
| Date: | 2003–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1039&r=sea |
| By: | Gaofeng Han (University of California Santa Cruz); Kaliappa Kalirajan (Foundation for Advanced Studies on International Development, Tokyo.); Nirvikar Singh (University of California, Santa Cruz) |
| Abstract: | This study compares the sources of growth in East Asia with the rest of the world, using a methodology that allows one to decompose total factor productivity (TFP) growth into technical efficiency changes (catching up) and technological progress. It applies a varying coefficients frontier production function model to aggregate data for the period 1970-1990, for a sample of 45 developed and developing countries. Our results are consistent with the view that East Asian economies were not outliers in terms of TFP growth. Of the high-performing East Asian economies, our methodology identifies South Korea as having the highest TFP growth, followed by Singapore, Taiwan and Japan. Our methodology also allows us to separately estimate technical efficiency change, which is a component of TFP growth, and we find that, in general, the estimated technical efficiency of the high-performing East Asian economies was not out of line with the rest of the world. |
| Keywords: | Total factor productivity growth, technical efficiency change, technical progress, sources of growth, varying coefficients frontier production functions, |
| Date: | 2003–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:1040&r=sea |
| By: | Inoue, Atsushi; Rossi, Barbara |
| Abstract: | This paper examines the major interest groups in the debate over allowing the wholesale re-importation of prescription drugs through the Pharmaceutical Market Access Act. By making use of the logit model, we see the effects that each of these groups has had on the voting behavior of the 108 th Congress on the bill. We find evidence suggesting that Representatives are maximizing their electoral prospects: Contributions from pharmaceutical manufacturers and HMOs significantly influence the probability of voting for the Bill. Similarly, Representatives are sensitive to their constituency’s interest: employment in pharmaceutical manufacturing and the presence of senior citizens are also taken into account. However, the decision was by and large a partisan one: Party affiliation was the most important factor in passing the Bill. |
| Keywords: | currency crises, forecasting, leading indicators, diffusion index, exchange rates |
| JEL: | F30 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:duk:dukeec:05-02&r=sea |
| By: | Byström , Hans (Department of Economics, Lund University); Worasinchai , Lugkana (School of Business, Bangkok University); Chongsithipol , Srisuda (Graduate School, Bangkok University) |
| Abstract: | This paper applies the Merton (1974) default probability model to the firms in the SET-50 index at the Stock Exchange of Thailand (SET). It also examines the rela- tionship between a firm's default probability and firm-specific characteristics like size and book-to-market ratio, and whether default risk is systematic or not. We believe this to be the first paper dealing with these issues using data from an emerging country. The study also differs from other studies by dealing with how the default risk of firms in different sec- tors of the economy changes during a severe crisis. Overall, we find a significant increase in market based default probabilities around the crisis and a fairly slow return to pre-crisis levels. The first sector to suffer a deterioration in creditworthiness was the sector of finance and securities firms and the worst effected sector at the peak of the Asian crisis was the building materials sector. There are further some indications of the most distressed firms being on average somewhat smaller than the least distressed, but only during the crisis. We do not find significant evidence of the book-to-market ratio being related to the default risk in this particular market, though. Finally, if default risk is systematic, one would expect that default risk is rewarded by higher returns. However, in this sample the level of default risk of a firm does not seem to be able to explain the firm's subsequent realized returns at different horizons. We therefore reject the hypothesis that default risk is systematic. |
| Keywords: | Thailand; stock market; default probabilities |
| JEL: | C20 G33 |
| Date: | 2004–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_005&r=sea |
| By: | Byström, Hans (Department of Economics, Lund University); Olofsdotter , Karin (Department of Economics, Lund University); Söderström, Lars (Department of Economics, Lund University) |
| Abstract: | This paper analyzes regional differences across Chinese regions, employing an optimum currency area framework. Empirically, we consider the cross-sectional correlation measure of Solnik & Roulet (2000) when examining data on GDP, trade, inflation and regional budget between 1991 and 2001. Our preliminary results suggest that China probably is more of an optimum currency area than first expected. It is debatable, though, whether Hong Kong and Macao are appropriate as candidates. The results also indicate that there might be other constellations of regions that could be closer to an optimum currency area than the current Yuan area. |
| Keywords: | China; optimum currency area; regional developments; cross-sectional correlation |
| JEL: | C32 F33 O53 |
| Date: | 2005–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_006&r=sea |
| By: | Fuller, Frank H.; Beghin, John C.; Hu, Dinghuan; Rozelle, Scott |
| Abstract: | This report documents data and other information gathered from a survey of urban households in Beijing, Shanghai, and Guangzhou, China. The survey was conducted as part of a research project aimed at understanding the evolution of dairy markets in Asia and the implications for dairy product trade. The survey data provide insights into the purchasing behavior and attitudes of urban consumers in China with respect to dairy products. The report describes the survey and collection process, summarizes selected data from the survey, and provides anecdotal information about the development of dairy production, processing, and product marketing in China. Keywords: China, dairy products, demand, production, supply chain, survey data. |
| Date: | 2004–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12034&r=sea |
| By: | Schultz, T. Paul (Yale University and IZA Bonn) |
| Abstract: | Life cycle savings is proposed as one explanation for much of the increase in savings and economic growth in Asia. The association between the age composition of a nation’s population and its savings rate, observed within 16 Asian countries from 1952 to 1992, is reestimated here to be less than a quarter the size reported in a seminal study, which assumed lagged savings is exogenous. Specification tests as well as common sense imply, moreover, that lagged savings is likely to be endogenous, and when estimated accordingly there remains no significant dependence of savings on the age composition, measured in several ways. Research should consider lifetime savings as a substitute for children, and model the causes for the decline in fertility which changes the age compositions and could thereby account for savings and growth in Asia. |
| Keywords: | life cycle savings, aging, Asian growth, demographic transition |
| JEL: | D91 J11 O11 O53 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1479&r=sea |
| By: | Takashi Obinata (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper investigates the value relevance of segment earnings in railroad companies. Operating profits in transportation and real estate business are value relevant. While operating losses in leisure business contains large noise, positive earnings is value relevant. Earnings in other segments are irrelevant. These results do not deny the prevailed thought that the diversification does not necessarily contribute to the growth of firm value. Operating revenues and expenses, investments, depreciation amount, and asset balances in each segment, which are mandated to disclose in Japan, are value relevant. In this sense, current disclosure regulation has a rational basis. Although the regulation on train fares was revised in the tide of deregulation, we cannot find the change in the relation between segment earnings and stock prices. The change of regulatory circumstances does not significantly influence the allocation of earnings over periods. On the other hand, accounting cross subsidization, i.e. the transfer of expenses from non-transportation segment to transportation segment, was reduced in second half period under investigation, as compared with the first half period. The change of regulatory circumstances affects the allocation of earnings among segments. However, the accounting subsidization (that is, the transfer of expenses) does not decrease the relevance of operating profits in segments. Discretionary allocation does not impair the information value of earnings. The transfer of expenses form non-transportation segment to transportation segment can increase the operating revenues in transportation segment, which is more certain than operating revenues in non-transportation segment, through cost principle in rate regulation and the transferred earnings is positively associated with firm value. |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2005cj123&r=sea |
| By: | David M. Kotz (University of Massachusetts Amherst) |
| Abstract: | This paper compares two radically different approaches to transforming an economic system based on central planning and state property into a capitalist system, the neoliberal transition strategy and the state directed transition strategy. Russia’s transition since 1992 is examined as an example of the neoliberal approach, while China’s transition since 1978 is analyzed as an example of the state directed approach. The primary explanation for China’s economically superior transition performance is located in the advantages of the state directed transition strategy. However, contradictions in a state directed transition strategy are identified which tend to promote an eventual shift toward a neoliberal strategy. JEL Categories: P27, P21, P52 |
| Keywords: | transition, neoliberalism, state, Russia, China |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2005-04&r=sea |
| By: | Arslan Razmi (University of Massachusetts Amherst) |
| Abstract: | The effects of FDI inflows on the external accounts of developing economies have been largely ignored in recent years. This paper contributes to filling this gap by developing a formal framework. Our economy consists of; (1) a non-tradable goods sector, and (2) a tradable goods sector in the form of an export processing zone operated by transnational corporations. The effects on the balance of payments are shown to depend on several interesting factors. By attempting to shed light on how various actors are affected by policy choices, this study highlights the political economy considerations involved as policy makers pursue various goals. The results raise concerns regarding recent trends in investment liberalization. JEL Categories: F21, F23, F41 |
| Keywords: | Foreign direct investment, structuralist models, non-tradable goods, tradable goods, balance of payments, investment liberalization, export processing zones, wage suppression, performance requirements, distributional conflicts, real exchange rates. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2005-03&r=sea |
| By: | Xavier Gine |
| Abstract: | The aim of this paper is to understand the mechanism underlying access to credit. Gine focuses on two important aspects of rural credit markets in Thailand. First, moneylenders and other informal lenders coexist with formal lending institutions such as government or commercial banks, and more recently, micro-lending institutions. Second, potential borrowers presumably face sizable transaction costs obtaining external credit. The author develops and estimates a model based on limited enforcement and transaction costs that provides a unified view of those facts. The results show that the limited ability of banks to enforce contracts, more than transaction costs, is crucial in understanding the observed diversity of lenders. This paper—a product of the Finance Team, Development Research Group—is part of a larger effort in the group to understand access to credit. |
| Keywords: | Domestic Finance; Rural Development |
| Date: | 2005–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3502&r=sea |
| By: | Martin Ravallion (World Bank); Michael M. Lokshin |
| Abstract: | The immediate welfare costs of an economywide crisis can be high, but are there also lasting impacts? And are they greater in some geographic areas than others? Ravallion and Lokshin study Indonesia’s severe financial crisis of 1998. They use 10 national surveys spanning 1993–2002, each covering 200,000 randomly sampled households, to estimate the impacts on mean consumption and the incidence of poverty across each of 260 districts. Counterfactual analyses indicate geographically diverse impacts years after the crisis. Proportionate impacts on the poverty rate were greater in initially better off and less unequal areas. In the aggregate, a large share—possibly the majority—of those Indonesians who were still poor in 2002 would not have been so without the 1998 crisis. This paper—a product of the Poverty Team, Development Research Group—is part of a larger effort in the group to assess the social impacts of economywide crises. |
| Keywords: | Macroecon & Growth; Poverty |
| Date: | 2005–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3503&r=sea |