Interdependence of ASEAN-5 Stock Markets from the US and Japan

Abstract

During the 12 years since 1992 when people started to use the dollar as a currency in Cambodia, the share of the dollar has reached more than 70% of the total currency. This dollarization phenomenon has resulted in large seigniorage losses for the Cambodian government. The costs are estimated up to US$682 million at the end of 2004 with an additional US$61 million lost annually. Furthermore, there are many other kinds of costs caused by the side effects of seigniorage loss. Without siegiorage, some monetary, fiscal and foreign trade policies are no longer available. Worsening the distortion of income distribution is another side effect. These are major costs of dollarization over the direct seigniorage loss. The benefits of dollarization include stabilizing price levels and lowering the risk of national default during a foreign currency crisis. It is not difficult to conclude that the costs of dollarization outweigh the benefits.

There are two de-dollarization methods. One is a policy that prohibits people from using the dollar as a currency by law. The other is the policy that widens the difference of the costs and the benefits of using dollars, also by law. Either method is applicable but it seems reasonable that the method of prohibition by direct law would be more effective and efficient than the other method, since 84% of the total population exclusively uses the riel in Cambodia.

It is totally dependent on the decision of the Cambodian government whether or not a de-dollarization policy is adopted. The results of the decision, for good or ill, will rest finally with the people of Cambodia.     

Currency Substitution and the Stability of the Demand for Money in East Asia

Abstract

This paper models and tests the stability of the demand for money in five East Asian countries—Indonesia, Malaysia, Philippines, Singapore, and Thailand—in the context of an open economy. The Johansen multivariate cointegration vector error correction analysis against quarterly data covering the period 1985:1–2001:4 was used. It was found that a stationary long run cointegrating relationship exists between broad money, real income, domestic interest rates, foreign interest rates corrected for exchange rate depreciation, and the expected rate of depreciation of the exchange rate. The results show that US Treasury bills rates and the foreign exchange rate vis-à-vis the US dollar play a significant role in the East Asian countries money demand relationship. This suggests that currency substitution vis-à-vis the US dollar may be an important consideration in the design and implementation of monetary policy in the East Asian countries. Furthermore, the results show that the Asian currency crises impacted the money demand functions negatively in these countries. CUSUM and CUSUMSQ stability tests show no evidence of parameter instability of the money demand functions in three of the five countries throughout the period under investigation.     

A Comparative Analysis of Export Price Pass-through in Three Open Asian Economies: Korea,Singapore and Thailand

Abstract

The degree of exchange rate pass-through is of paramount importance to small and open economies as it has a direct impact on domestic inflation as well as the effectiveness of exchange rate as an adjustment tool. High exchange rate pass-through (ERPT) is often cited as a reason for a “fear of floating”. This article analyzes the degree of ERPT into the export prices of three Asian economies—Korea, Thailand and Singapore for the period 1980: Q1–2006: Q4 using both US dollar bilateral rates as well as nominal effective exchange rates. The study also examines whether there are asymmetries in ERPT between exchange rate appreciation and depreciation.     

Exchange rates,global imbalances,and interdependence in East Asia

The paper analyzes East Asian interdependence in the face of global imbalances. A macro-econometric multinational model is used, describing Korea, Japan, China and the rest of East Asia in their respective relations with the United States as well as with the rest of the world. US imbalances and their expected consequences, notably a depreciation of the dollar and the slowdown of US demand, have rather contrasted effects on East Asian economies, depending on relative magnitudes of the two components. Korea is more affected by the dollar depreciation while China is more exposed to the US slowdown. Japan, less open and less dependent on the US market, is less touched. The correction of East Asian exchange-rate misalignments, which have prevailed since the beginning of the 2000s, would badly affect East Asian economies if undertaken too abruptly. Lastly, the perspective of creating an area of stabilised exchange rates between won, yen and other currencies, organized either as a common currencies basket system or in a regime based on the ACU, is explored preliminarily. Sets of simulations comparing adjustment mechanisms between East Asian countries, with or without the possibility of monetary adjustment, illustrate the cost of precluding exchange-rate adjustments in the case of asymmetric demand shocks.     

The political economy of exchange rates: The case of the Japanese yen

This paper sets out a political economy model of strategic exchange rates, focusing on the importance of external pressures. In our approach, an exchange rate depreciation is shown to be analytically equivalent to an export subsidy and an import tax. Thus lobbying for exchange rate policy is akin to lobbying for trade policies. Applying our model to the recent history of the Japanese yen, we show that pressures from the US government can theoretically contribute to an appreciation of the Japanese yen. In addition, the yen will still appreciate even if we assume that the Japanese international firms are Aoki-type J-firms.     

Exchange Rate Expectations,the Forward Exchange Rate Bias and Risk Premia in Target Zones

Expected rates of depreciation within the target zone for the exchange rates of four Nordic countries during 1979–1989 are estimated. Combining these with expected rates of devaluation estimated by Edin and Vredin (1993) we obtain time-series of the overall expected exchange rate change. We can thus construct time-series of foreign exchange risk premia and expectational errors, following which we decompose the forward exchange rate bias into portions attributable to expectational errors and/or risk premia. The conclusion is that time-varying risk premia appear to be the dominant cause of deviations from uncovered interest parity while the role of expectational errors is less clear.     

Exchange Rate Regime,Financial Market Bubbles and Long‐term Growth in China: Lessons from Japan

Since 2014, capital inflows into China have turned into capital outflows, reversing the gradual appreciation path of the renminbi against the US dollar into an erratic depreciation path. The paper explains the current capital outflows by comparing China and Japan with respect to the impact of exchange rate expectations on speculative capital flows. It is argued that both in China and Japan, given benign liquidity conditions in the USA, policy‐induced appreciation expectations have generated capital inflows that have contributed to overinvestment and financial market bubbles. The current reversal of capital flows is seen as a signal that the bubble in China has burst. To stabilize growth in China and to discourage speculative capital outflows a fixed exchange rate to the dollar is recommended. Given Japan's experience and given that China's foreign assets remain high, the depreciation pressure on the Chinese renminbi can be expected to abate.     

Interest rates, exchange rates and international adjustment: BW II dynamics

Recent attempts to explain the dynamics of adjustment of dollar exchange rates in the face of an anticipated deterioration of the US net international investment position have focused on portfolio balance models of exchange rate determination. In this paper we argue that such models are useful in understanding the behavior of dollar exchange rates with emerging market currencies but, consistent with a large body of empirical research, are not useful in understanding changes in the dollars value against the euro or the currencies of other developed countries. We conclude that portfolio preferences of governments of emerging markets provide the most plausible explanation for the persistent US current account deficit.     

Mark och människor. Befolkning och försörjnings-resurser i väslra Småland 1800–1850

Abstract

This dissertation is chiefly about land reclamation, redistribution of holdings and population change in two south Swedish län (counties)—Jönköping and Kronoberg—during the period 1800-1850. These were wooded areas with relatively little arable land, their economy being supplemented by cattle farming, handicraft production for the market, and forestry. Selfsufficient farms predominated, but increasing integration into the market economy provided the background to the changes described by Karlsson.     

Real Exchange Rate Dynamics in the Asian Economies: Can Regime Shifts Explain Purchasing Power Parity Puzzles?

Abstract

We show that the strong version of the purchasing power parity (PPP) hypothesis holds in most of the US dollar real exchange rates using cointegration method that accounts for breaks in the models. The break dates in seven of the Asian currencies coincide with the two rounds of currency depreciation recorded during the 1997–1998 financial crises. We obtain a mean half-life estimate of about 10 months for PPP to converge to its long-run equilibrium level. Our confidence intervals based on persistence profile approach for the half-lives is much narrower than previous evidence might indicate. Taken together, these results show that mean reversion is stronger than commonly thought.     

Location choice in low-income countries: Evidence from Japanese investments in East Asia

Unlike most existing studies, this paper examines the location choices of multinational enterprises (MNEs) in low-income countries. Specifically, we investigate the location choices of Japanese MNEs among East Asian developing countries by estimating a four-stage nested logit model and a mixed logit model at the province level. Our findings are as follows. First, Japanese MNEs consider Cambodia, Laos, Myanmar, and Vietnam to be host countries different from China and the forerunners of ASEAN. In other words, for Japanese investors, ASEAN forerunners are countries replaceable by China. Second, the mechanics of vertical FDI are more likely to appear in FDIs in low-income countries. For example, rather than the market size of the host country, tariff rates on products from investing countries are more crucial location elements.     

The implications of monetary expansion in China for the US dollar

We examine the influence of rapid growth in China's money supply on the US dollar within a framework of monetary models of exchange rates. We develop out-of-sample forecasts of the US dollar exchange rate using US and global data on price level, output, and interest rates, and money supply data for the US, China, and the rest of the world for the period 1996–2013. Monetary model forecasts significantly outperform a random walk forecast in terms of mean squared forecast error in the long run. A monetary error correction model with sticky prices performs best. Rolling sample analysis indicates changes over time in the influence of Chinese money supply in forecasting the US dollar. The expectation is that rapid money growth in China would increase the demand for dollars thus raising the value of the dollar, yet our forecasts are to the contrary for the mid 2000s. This is consistent with anticipation of renminbi appreciation under China’s managed exchange rate, which made holding renminbi more attractive. With the break from a dollar peg in 2005 and subsequent currency appreciation, the distortion was alleviated and the forecast direction for the dollar became as expected.     

The Post‐Mao economic reform in China: A Korean view

Abstract

Previous studies that were concerned with the impact of depreciation of the ringgit on the Malaysian trade balance employed data either between Malaysia and rest of the world or between Malaysia and each of her major trading partners. Specifically, the bilateral trade balance between Malaysia and the US is shown to be insensitive to the real bilateral ringgit–dollar rate. In this article we wonder if disaggregating trade flows between Malaysia and the US by commodity could help us to discover any significant effects that the real exchange rate could have. We consider 101 industries that export from US to Malaysia and 17 industries that import from Malaysia. While majority of the industries showed short-run sensitivity to the real bilateral exchange rate, short-run effects lasted into the long run almost in half of the industries in both group.     

Foreign exchange markets and oil prices in Asia

In this paper, we examine whether oil price can predict exchange rate returns for 14 Asian countries. A new GLS-based time series predictive regression model proposed by Westerlund and Narayan (WN, 2012) is used. The main finding is that higher oil price leads to future depreciation of the Vietnamese dong but future appreciations of the local currencies of Bangladesh, Cambodia, and Hong Kong. A comparison of the widely used Lewellen (2004) and WN (2012) estimators show that both provide similar results in in-sample analysis, although WN is relatively superior at longer horizons in out-of-sample analysis.     

Financial Market Volatility and International Reserve Holding Behaviour: A Case Study for Korea,Indonesia, the Philippines,and Thailand

Abstract

The effects of financial market volatility on the international reserve holding behaviour of four Asian countries that experienced the financial crisis in 1997—Korea, Indonesia, the Philippines, and Thailand are investigated. The financial market volatility is modelled and the effect on reserve dynamics, reserve accumulation, and reserve volatility is estimated. Estimations are taken for two periods—pre- and post-crisis—and the structural break test is performed to examine the change in the effects on reserve holding behaviour. The empirical results, in general, support the evidence for the structural change in the effects on reserve holding behaviour after the crisis. This would be one of the evidences of the precautionary motive for reserve holdings after the crisis.     

On black market exchange rate and demand for money in developing countries: The case of Nigeria

This paper examines the hitherto unexplored question of the effects of the black market exchange rate expectations on the domestic demand for money in Nigeria. This study finds that real income and expected inflation rates are the appropriate scale and opportunity cost variables for the demand for money function in Nigeria. The results also suggest that depreciation in black market exchange rate exerts a significant negative impact on the domestic demand for money. A policy implication of this research is that since a depreciation of the black market exchange rate tends to decrease the demand for money, it should be taken into account in the execution of monetary policy. The authors would like to thank an anonymous referee for helpful suggestions which substantially improved the quality of the paper. This research was supported in part by a summer research grant from the College of Business Administration, University of New Orleans.     

Testing the Marshall–Lerner Condition in Kenya

In this paper we examine the Marshall–Lerner (ML) condition for the Kenyan economy. In particular, we use quarterly data on the log of real exchange rates, export/import ratio and relative (US) income for the time period 1996q1‐2011q4, and employ techniques based on the concept of long memory or long‐range dependence. Specifically, we use fractional integration and cointegration methods, which are more general than standard approaches based exclusively on integer degrees of differentiation. The results indicate that there exists a well‐defined, cointegrating relationship linking the balance of payments to the real exchange rate and relative income, and that the ML condition is satisfied in the long run, although the convergence process is relatively slow. They also imply that a moderate depreciation of the Kenyan shilling may have a stabilising influence on the balance of trade through the current account without the need for high interest rates.     

The Vietnamese Economy in the 1990s

In the 1980s Vietnam made the transition from a centrally planned economy to a market economy. The critical question now facing Vietnam is whether the remarkable growth rates it has achieved in recent years are sustainable over the long term. Does Vietnam have a viable strategy for long-term growth, and if not, where can it find one, and what does it have to do to implement it? These are the principal questions addressed in this review of recent literature on economic developments in Vietnam.     

弱势美元背景下的中国资本账户开放

2006年以来,美元对国际主要货币的大幅贬值导致全球金融市场动荡,国际短期资本大量流向中国,威胁中国的金融安全,使中国有步骤推进人民币资本账户可兑换、促进跨境资金双向流动的计划受到挑战。中国需要继续完善市场经济体制,按照市场化原则稳步推进资本账户开放;采取盯住货币汇率制度、完善外汇市场等手段,促进人民币汇率的稳定和灵活;提升人民币的国际影响力,增强中国经济抵抗外部冲击的能力。     

国际经济背景下美元贬值的原因、影响及对策分析

美元贬值主要是由美元与主要经济体货币调整不同步以及方向选择差异而形成。对于不同经济体而言,美元贬值存在着非常分明的正负效应,由此导致了各国政府态度认识上的不同。同时,总体上美元的渐次贬值有利于全球经济走向均衡,但速率过猛的美元贬值却会破坏国际经济的均衡。因此,未来美元的下跌空间会受到限制,“美元危机”只是一个伪命题。