ASIAN BUSINESS CYCLE SYNCHRONIZATION

This paper develops a multilevel structural factor model to study international output comovement and its underlying driving forces. Our method combines a structural vector autoregression with a multilevel factor model, which helps us understand the economic meaning of the estimated factors. Using quarterly data of real GDP growth covering 9 emerging Asian economies and G‐7 countries, we estimate a global supply factor, a global demand factor, and group supply and demand factors for each group of the economies. We find that although the role of the global factors has intensified over the past 15 years for most of the economies, output fluctuations in Asia have remained less synchronized with the global factor than those in the industrial countries. The Asian regional factors have become increasingly important in tightening the interdependence within the region over time. Therefore, although emerging Asian economies cannot ‘decouple’ completely from the advanced economies, they have, nonetheless, sustained a strong independent cycle among themselves. We also find that synchronized supply shocks contributed more to the observed synchronization in output fluctuations among the Asian economies than demand shocks. This points to the role of productivity enhancement and transmission of other supply shocks through, for example, vertical trade integration, rather than dependence on external demand, as the primary source of business cycle synchronization in emerging Asia.     

Regional unemployment and human capital in transition economies1

Differences in regional unemployment in post‐communist economies are large and persistent. We show that within‐country regional variation in inherited human capital in four such economies explains the bulk of regional variation in unemployment; we explore potential explanations. Our evidence suggests that internal skill‐biased migration and the flow of foreign direct investment are not working as adjustment mechanisms but rather help explain the lack of convergence in regional unemployment rates. Although this capital and labour mobility pattern is consistent with the presence of regional skill spillovers, we find little support for this hypothesis. Instead, the observed migration pattern appears to arise from different skill‐specific adjustments to regional shocks brought about in part by labour‐market institutions such as guaranteed welfare income.     

Is East Asia an optimum currency area?

This paper assesses the empirical desirability of the East Asian economies to an alternative exchange rate arrangement (a monetary union) that can potentially enhance the exchange rate stability and credibility in the region. Specifically, the symmetry in macroeconomic disturbances of the East Asian economies is examined as satisfying one of the preconditions for forming an Optimum Currency Area (OCA). We extend the existing literature by improving the methodology of assessing the symmetry shocks in evaluating the suitability of a common currency area in the East Asian economies employing the Bayesian State-Space Based approach. We consider a model of an economy in which the output is influenced by global, regional and country-specific shocks. The importance of a common regional shock would provide a case for a regional common currency. This model allows us to examine regional and country-specific cycles simultaneously with the world business cycle. The importance of the shocks decomposition is that studying a subset of countries can lead one to believe that observed co-movement is particular to that subset of countries when it in fact is common to a much larger group of countries. In addition, the understanding of the sources of international economic fluctuations is important for making policy decisions. The falling share of country specific factor and the rising role of region factor indicate that East Asia has become increasingly favorable for a monetary union. However, the share of country-specific factor that is still significant implies that it could be costly to renounce individual currencies to advance into a monetary union in East Asia.     

Regional Accounts of India: Methods,New Estimates,and Their Uses

For large economies with substantial regional variation, it is of great importance for policymakers and economic analysis that macro‐economic statistics are broken down by region. This paper reviews the regional accounts in India, discusses their role in Indian federal and state policies, and provides new estimates to cover major data gaps. Statistics on domestic product by Indian state, broken down by industry, are regularly published. But despite demands and recommendations by various commissions and policymakers, a comprehensive system of regional accounts is yet to be developed. New estimates for the period 1993–2010 are presented for saving and the macro‐economic expenditure by Indian states, like final consumption, capital formation, and trade balance. They show, for example, that some of the fastest growing Indian states have increased their saving and investment rates to 50 percent of their domestic product.     

Dynamics of Business Cycles in Asia: Differences and Similarities

The paper documents the extent of similarities and differences of business cycle characteristics of the Asian countries and compares the cyclical regularities in this region with those of the G‐7 countries. The Asian economies are generally more volatile than the G‐7 countries, but the amplitude of economic fluctuations in the Asian countries tends to decrease over time. Comovement and persistence properties of business cycles in the Asian countries are very similar to those of the G‐7 economies. The authors find that while the patterns of business cycle fluctuations in the main macroeconomic aggregates display important similarities, the behavior of fiscal and monetary policy variables exhibits significant differences across the Asian countries. Moreover, there is a high degree of comovement between the individual country business cycles and different measures of the Asian business cycle, indicating that there is a regional business cycle specific to the Asian countries.     

Financial Integration in Emerging Asia: Challenges and Prospects

Using both quantity‐ and price‐based measures of financial integration, the paper shows an increasing degree of financial openness and integration in emerging Asia. Assessing the impact of a regional shock relative to a global shock on local equity and bond markets, the findings suggest that the region's equity markets are integrated more globally than regionally, although the degrees of both regional and global integration have increased significantly since the 1997/1998 Asian financial crisis. However, emerging Asia's local currency bond markets remain generally segmented, being neither regionally nor globally integrated. There are potential benefits from increased regional integration of financial markets. Financial integration at the regional level allows for the region's economies to benefit from allocation efficiency and risk diversification. Policymakers in the region must strike the right balance between maximizing the net benefits from regional and global financial openness, and minimizing the potential costs of financial contagion and crisis.     

China's regional income disparityAn alternative way to think of the sources and causes1

Using data on China's provincial economies for the period 1978–2005, we decomposed the causes and factors that have contributed to inter‐regional per capita income disparity. Variance in capital per employee and variance in capital elasticity are found to be the two main sources of income disparity while the employment–labour force ratio is shown to be an important factor in containing the rise of income disparity. An analysis on inter‐regional factor reallocation effects reveals their relatively small and insignificant contributions to overall growth performance. It is also discovered that capital has in most years flowed in the right direction to pursue higher marginal productivity across provincial economies. Inter‐provincial labour movement, on the other hand, had not displayed significant equilibrating effects until institutional reforms started to allow freer inter‐regional labour mobility in later years. Generally, we conclude that market‐oriented factor mobility has played a crucial role in equalizing factor returns as well as enhancing growth efficiency across regions.     

TOURISM AND INDUSTRIAL AGGLOMERATION

Tourism generates considerable income and employment in host countries and regions, which substantially improves local economies. Meanwhile, the manufacturing sector remains the most important part in regional and national economies. This paper investigates their interdependence through a general‐equilibrium analysis. On the one hand, a tourism boom is pro‐industrialization because the income generated by tourism attracts more manufacturing firms and, on the other hand, de‐industrialization for attracting labour from the manufacturing sector. We clarify conditions of trade balances in three sectors. The welfare analysis clarifies conditions for the smaller country to be better off, and conditions for the equilibrium to be optimal.     

China's Fiscal Decentralization and Regional Economic Growth

The present paper applies Lucas's theory of endogenous growth and Stiglitz's theory of local public goods to build an econometric model consisting of five simultaneous equations to study China's fiscal decentralization effects on regional economic growth. The model is estimated by two‐stage least squares using a set of panel data on 31 Chinese provinces during 1996–2005. The estimated results show that China's fiscal decentralization increased the local governments' expenditure on physical infrastructure and education, which led to the rising local physical capital stock and human capital levels, respectively, and then resulted in the growth of regional economies.     

Home Bias,Border Effect and Internal Market Integration in China: Evidence from Inter‐provincial Value‐added Tax Statistics

This paper examines the home bias in regional trade and the integration of the internal market in China using inter‐provincial value‐added tax statistics. The administrative border between regions is an important trade barrier that results in home bias. Using a border effect model, we find evidence of home bias in provincial trade and relatively low border effects in domestic‐products trade in China. Moreover, the multilateral resistance model, based on a microeconomic foundation, also has strong power in explaining border effects in provincial trade. The empirical results imply that in accordance with some developed economies, China's market integration appears to have reached a high level.     

Determinants of labour productivity: Comparison between developing and developed countries of Asia‐Pacific

The current study investigates the trends in labour productivity of the major developing and developed economies of the Asia‐Pacific region and examines its determinants over the period 1980–2014. The study analyses capital deepening, human capital, technology, share of agriculture in GDP, financial development, institutional quality, inflation as well as macroeconomic variables as potential determinants of productivity, and identifies the differences in the impact of these factors on the productivity of developing and developed countries. Using panel cointegration and group‐mean fully modified ordinary least squares estimation, the study finds that capital deepening, human capital, technology, institutional quality and macroeconomic variables (i.e. government size and openness) are significant determinants of labour productivity of both developing and developed economies of the Asia‐Pacific region. The study further finds that while both trade openness and foreign direct investment affect productivity of developing economies positively, only trade openness has a positive and significant impact on the productivity of developed economies. The share of agriculture in GDP affects the labour productivity of developing Asia‐Pacific economies significantly but not that of developed economies. Furthermore, capital deepening has a much higher impact on the productivity of developing Asia‐Pacific economies than that of developed economies.     

The gravity approach for modeling international trade patterns for economies in transition

The advantages of using the gravity approach for modeling transition processes in foreign trade are the ability of gravity models to explain international trade patterns under the conditions of comparatively little data and for validity of theoretical background of the model to the economies in transition. Both advantages are important when modeling transition processes. The results from using the gravity approach to explore the international trade patterns of Estonia as a country with a small, open, and comparatively successful transitional economy allow us to conclude that economies in transition should look for a regional niche to penetrate into the world market. Estonia has an excellent potential to develop trade relations within the Baltic Sea region (Baltic Rim) countries. Estonia's situation is certainly not unique, and conclusions presented in this paper could be applied to analyses of international trade patterns in other economies in transition.This paper was prepared with the support of the Estonian Science Foundation research grant (3067). The author is grateful for this support.     

The Implications of Rybczynski’s Theorem for Government Spending,Learning by Doing,and Labor Mobility

The evolution of a small open economy or region with labor mobility and dynamic scale economies in the high-tech sector is analyzed using the neoclassical 2×2-model. Government services are inputs to private production and influence specialization according to Rybczynskis theorem. This effect is reinforced by dynamic scale economies. Empirically observed differences in regional development and specialization are explained by diverging government policies and/or history-dependent factors. Despite of diverging wage rates, diversified regions and regions specialized in low-tech production may coexist with a common level of per capita incomes.     

Real and Financial Integration in East Asia

This paper examines the real and financial integration of East Asian economies, by comparing the degree of real vs financial and global vs regional integration, before vs after the Asian crisis. First, price and quantity measures such as the size of intra‐ and inter‐regional trade, cross‐border financial assets, stock return correlation, and interest rate differentials are investigated. Second, the structural panel vector autoregression (VAR) model is constructed to analyze macroeconomic consequences of real and financial integration such as cross‐country output and consumption relation. The results suggest that (i) the degree of real integration significantly increased after the crisis, both regionally and globally; (iii) quantity and price measures showed an increased financial integration after the crisis, but the consumption relation did not; (iv) the degree of regional financial integration is smaller than that of global financial integration, based on the consumption relation; and (v) financial integration lags real integration, especially for regional integration.     

内地与澳门、粤澳经贸合作对澳门经济增长影响的实证研究——基于中国澳门回归十年以来的数据

基于区域经济一体化理论,利用中国澳门回归十年以来的经济数据,通过计量模型分析可知：内地在澳门的旅游、金融及投资方面对澳门经济增长起着举足轻重的作用。其中,广东省与澳门进出口贸易的线性相关性更加显著。     

CO‐MOVEMENT OF AUSTRALIAN STATE BUSINESS CYCLES*

We use a variety of techniques to examine the nature and degree of co‐movement among Australian state business cycles. Consistent with the results of Dixon and Shepherd (2001 ), we find that these cycles move quite closely together, with particularly strong links between the cycles of the larger states. We then seek to understand the causes of this co‐movement by using an unobserved components model to distinguish between various shocks and their transmission. Our model implies that the major source of this co‐movement in state activity is the commonality of shocks affecting state cycles. In contrast, spillovers of region‐specific shocks appear to play only a minor role in creating co‐movement, though region‐specific shocks themselves have a moderate influence on cyclical fluctuations. These findings are consistent with the results of recent studies for the United States, Canada and Europe, where common shocks have also been found to dominate regional cyclical activity.     

偏好、技术与工业化

Krugman(1 991b)的两地区模型解释了报酬递增的制造业企业为实现规模经济和降低运输成本而定位于需求较大的市场区域。本文通过引入部门间人口流动成本和地区间技术差异 ,认为新兴制造业可以在外围地区形成 ,并缩小地区间差异。     

REGIONAL UNEMPLOYMENT DISPARITIES: AN EVALUATION OF POLICY MEASURES*

This paper analyses the efficacy of regional and federal government policies in reducing inter‐regional unemployment disparities. We use as our framework a two‐region general equilibrium model with a given freely‐mobile supply of labour. We assume inter‐regional migration to occur in response to inter‐regional utility differentials. Each region has households, firms and a regional government. In addition to regional governments, there is a federal government. The firms in a region use a single factor, labour, to produce a single good which we assume to be different to that produced in the other region. It is supplied to households and to the regional government in the form of payroll taxes. Households consume some, trade some with households in the other region and give some up to the federal government as income tax. Firms and households bargain over wages and firms then choose employment to maximise profits. The resulting equilibrium will generally not be a full‐employment one. We simulate a linearised numerical version of the model. We examine seven alternative policies, six carried out by a regional government and one by the federal government. In the first group there are traditional tax/expenditure polices as well as policies which might be seen as attacking the natural rate of unemployment: changes in unemployment benefits, changes in union power, changes in the labour force and changes in labour productivity. The federal government policy is a regionally‐differentiated fiscal policy. Contrary to expectations, many policies which have traditionally been recommended to alleviate unemployment are found, in fact, to exacerbate the unemployment problem.     

Managerial pay and executive turnover in the Czech and Slovak Republics*

Despite the crucial role played by managers in changing the functioning of labour markets in transition economies, research on the determinants of executive pay and CEO turnover in these countries is almost non‐existent. The current paper aims to add to this minuscule literature. For this purpose I make use of a unique dataset containing relevant firm–manager information from the Czech and Slovak Republics in the late nineties. This allows me to examine the influence of individual and in particular firm characteristics, such as, size, ownership type, industry and region, as well as corporate performance on chief executive compensation levels and changes therein and on the extent of executive turnover.     

川渝地区产业关联与产业合作政策研究

研究区域间的产业关联情况是开展区域经济合作的基础性工作.对此,采用投入产出矩阵不仅数据需求量较低,其结果也较为准确.本文运用区域间投入产出分析方法中的MRIO模型,对川渝间38个部门的产业关联情况进行实证分析:首先测算了川渝地区产业部门之间的影响力系数和感应度系数,然后对38个部门的产业关联强度进行了分类排位,最后据此提出了川渝之间开展产业合作的政策建议.