Exchange rates,price levels,and inflation targeting: Evidence from Asian countries

This study examines how the adoption of inflation-targeting influenced exchange rate pass-through and volatility in four Asian countries –Indonesia, South Korea, the Philippines, and Thailand – over the sample period of January 1990 to June 2007. We find that adopting inflation targeting helped reduce pass-through in South Korea, and Thailand, while the results are less clear for Indonesia and the Philippines. Nevertheless, the findings indicate that inflation targeting caused a decline in exchange rate volatility in all four countries. The important lesson from the experiences of these Asian countries is that the adoption of inflation targeting contributes to achieving the ultimate goal of inflation stability through reducing exchange rate pass-through or variability.     

The structuralist explanation in the theory of inflation

This paper argues that three main elements form the basis of both the Latin American and the European branches of the structuralist school of inflation theory. These elements are: (1) relative prices that change when economic structure changes; (2) downward inflexibility of (some) money prices; and (3) a passive money supply closing the deflationary gap caused by price increases. The only difference between the two branches is what they consider to be the main cause of structural change.The object of this paper is to show that models worked out by Latin American structuralists during the 1960s and models developed recently by European structuralists have a common reduced form and describe similar inflationary processes.     

Domestic inflation and exchange rate changes: The less-developed countries’ case

Zusammenfassung Heimische Inflation und Wechselkurs?nderungen: Der Fall der Entwicklungsl?nder. — In diesem Aufsatz werden die Ergebnisse von Versuchen vorgelegt, das Ausmaβ, in dem Wechselkurs?nderungen zur heimischen Inflation beigetragen haben, zu bestimmen. Beim Sch?tzen der Preisgleichung werden grunds?tzlich zwei Hypothesen für den inflation?ren Prozeβ gegenübergestellt: (a) ein quantit?tstheoretisches Inflationsmodell für eine geschlossene Wirtschaft, das Ver?nderungen der Geldmenge, des Realeinkommens und der Inflationserwar-tung als unabh?ngige Variable verwendet; (b) ein Modell für Preis?nderungen in einer offenen Volkswirtschaft mit variablen Wechselkursen, das zus?tzlich zu den Variablen in (a) auch Ver?nderungen der Weltmarktpreise international gehandelter Güter und Ver?nderungen der Wechselkurse enth?lt. Die Regressionsanalyse beschr?nkt sich auf vier L?nder: Brasilien, Kolumbien, Südkorea und die Philippinen. Obwohl unsere Ergebnisse als vorl?ufig anzusehen sind und sich ?ndern k?nnten, wenn die Untersuchung auf andere L?nder ausgedehnt wird, zeigt sich doch, daβ für relativ offene Volkswirtschaften ein variabler Wechselkurs zus?tzliche Kosten in Form einer h?heren Inflationsrate herbeizuführen scheint. Wir argumentieren, daβ seltene und starke Abwertungen erheblich zur Bildung einer Inflationserwartung beitragen. Wenn — wie im Fall von Brasilien und Kolumbien — die Wechselkursanpassungen st?ndig und schrittweise vorgenommen werden, ist das Risiko, daβ sich daraus eine Lohn-Preis-Spirale ergeben wird, viel geringer. Also haben die übertriebenen Preis-wirkungen, die sich aus groβen Abwertungen ergeben, einen selbstverst?rkenden Aspekt.

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Résumé L’inflation locale et les changes de taux de change: Le cas des pays en voie de développement. — Dans ce papier nous reportons les résultats de quelques tests préliminaires essayant de déterminer l’étendue de la contribution des change-ments des taux des changes à l’inflation locale. En estimant l’équation de prix en principe nous contrastons deux hypothèses du procès inflationniste: (a) un modèle d’inflation de théorie de quantité d’argent en économie fermée qui prend les changes en stock d’argent, en revenu réel et en expectative inflationniste comme variables indépendantes; (b) un modèle des changes de prix en économie ouverte avec des taux de change variables, qui incorpore en addition des variables mentionnées sous (a) aussi des changes en prix mondial des produits commer?ables et des changes de taux de change. Nous avons limité l’analyse de régression à quatre pays: le Brésil, la Colombie, la Corée du Sud et les Philippines. Pendant que nos conclusions sont tentatives et pourraient être modifiées suivant l’extension de l’étude aux pays additionnels, on peut démontrer que pour des pays développants qui sont relative-ment ouverts un taux de change variable semble imposer des co?ts additionnels en terme d’un taux d’inflation plus haut à accepter par le pays. Nous arguions que des dévaluations infréquentes et grandes signifiantement contribuent à la formation de l’expectative inflationniste. Si, comme dans le cas du Brésil et de la Colombie, l’ajus-tement en taux de change a devenu une affaire continuante et graduelle, puis le risque d’une spirale résultante de salaire-prix est plus petit. En conséquence, les effets de prix exagérés produits par des dévaluations grandes ont un aspect d’autoren-forcement vis-à-vis elles.

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Resumen Inflación doméstica y variaciones en la tasa de cambio. E1 caso de los países en desarrollo. — En este articulo se dan a conocer los resultados de algunos tests preliminares realizados con la intención de determinar en qué medida las variaciones en las tasas de cambio han contribuido a la inflación doméstica. Al estimar la ecuación de precios se contrastan básicamente dos hipótesis del proceso inflacionario: (a) un modelo de inflación monetaria basado en la teoría cuantitativa para una economía cerrada, en que los cambios en el stock monetario, ingreso real y expectativas inflacionarias se consideran como variables independientes; (b) un modelo de variación de precios para una economía abierta con tasas de cambio variables, que incorpora además de las variables en (a) también cambios en el precio mundial de productos transables y variaciones en las tasas de cambio. E1 análisis de regresión se redujo a cuatro países: Brasil, Colombia, Corea del Sur y las Filipinas. Mientras las conclusiones son tentativas y podrian ser modincadas en la medida que el estudio se extienda a países adicionales, se puede detectar que para las economías en desarrollo relativamente abiertas una tasa de cambio variable parece imponer un costo adicional en términos de una tasa de inflación superior que el país tendrá que aceptar. Nosotros razonamos que devaluaciones grandes y poco frecuentes contribuyen significativamente a la formación de expectativas inflacionarias. Cuando, como en el caso de Brasil y Colombia, el ajuste de la tasa de cambio se ha trans-formado en un asunto continuo y gradual, entonces el riesgo del surgimiento de una espiral salarios-precios es mucho menor. De tal manera, los efectos exagerados sobre los precios producidos por grandes devaluaciones tienen un aspecto autore-forzante sobre los mismos.

     

The monetarist experiment in Chile: A critical survey

Chile constitutes the most outstanding case of implementation of an extreme market economy model. During nine years, between 1973 and 1982, a model was implemented that for its ‘pureness’, deepness and extension induced a drastic transformation of the Chilean economy. The main features of the model are examined, focusing on the anti-inflationary policy, the reform of the financial system, and the external opening. Then the global results concerning output, income distribution and saving-investment are studied. The paper shows that the balance of the results was clearly negative during the 1973–1981 period: output stagnated, the concentration of wealth was spectacular, and saving and investment rates fell significantly. The characteristics themselves of the model and the weakening of the productive apparatus that they originated, additionally explain that the international recession was multiplied during 1982 within the domestic economy. The paper concludes with an attempt to interpret the main causes of the failure of this ‘experiment’.     

Child Labour: a survey of selected Asian countries

While the African continent has the highest child labour force participation rates, Asia contains the largest pool of child workers. The nature, magnitude and decline in child labour vary sharply between Asian countries. East Asia now has little child labour; however, child labour continues to have a significant presence in South Asia and in parts of Southeast Asia. This paper surveys the literature on child labour in selected Asian countries, paying special attention to its causes and consequences. The evidence presented shows that Asian child labour, especially in South and Southeast Asia, has some common features. For example, the bulk of child labour is in the 10–14 years age group. The phenomenon is largely rural, and child domestic labour constitutes a significant share. The participation rate of Asian children in the 15–17 years age group in economic activities, 48.4 per cent, is the highest in the world. There is a significant gender element in Asian child labour with boys outnumbering girls in economically active work, while the reverse is the case with domestic child labour. A focus of the survey is the empirical findings that provide insights into the policy instruments that may be needed in combating this phenomenon. The survey also discusses some of the important international and national initiatives that have been taken to reduce child labour.     

The magnitude and determinants of capital flight: The case for six sub-Saharan African countries

Summary Most studies treat capital flight as an exclusively Latin American problem. This paper estimates capital flight for six African countries and shows that the emphasis on Latin American capital flight is not correct. It appears that the burden of capital flight is also important for many African countries. Moreover, this paper tries to find some determinants for the African countries' capital flight. The increase of government and government-guaranteed foreign debt and the overvaluation of the real exchange rate appear to be the most important explanatory factors of capital flight for the African countries in this study.The authors would like to thank Peter van Bergeijk, Richard Brown, Nanne Brunia, Richard Gigengack, Ger Lanjouw, the participants of the Development Economics Seminar, March 1992, Institute of Social Studies, The Hague, and an anonymous referee for their useful comments.     

On the measurement of imported inflation in developing countries

Zusammenfassung Zur Messung der importierten Inflation in Entwicklungsl?ndern. — W?hrend die Inflationsraten in allen Entwicklungsl?ndern in letzter Zeit stark angestiegen sind, war der Anstieg in den einzelnen L?ndern sehr unterschiedlich. Dies erh?hte das Interesse daran, den Teil der Preissteigerung festzustellen, der auf ?u\ere Einflüsse zurückzuführen ist. Hier wird die Ansicht vertreten, da\ die relative Bedeutung der importierten Inflation leicht überbetont werden kann, wenn man bei Entwicklungsl?ndern mit Annahmen arbeitet, die üblicherweise für Industriel?nder angewandt werden. Insbesondere dürften in Entwicklungsl?ndern Abweichungen der Produktion vom Trend aus verschiedenen Gründen ein schlechtes Ma\ für einen Nachfrageüberschu\ sein. Es trifft auch nicht notwendigerweise zu, da\ Entwicklungsl?nder ausl?ndische Reserveflüsse nicht neutralisieren k?nnen. Unter diesen Umst?nden dürfte — wie am Beispiel der Philippinen gezeigt wird — eine Geldmengen-Preis-Gleichung weit erfolgreicher sein, zwischen Importpreisen und inl?ndischem Nachfragesog als Ursache der Inflation zu unterscheiden.

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Résumé Sur le mesurage d’inflation importée dans des pays en voie de développement. — Pendant que les taux d’inflation ont fortement accéléré dans des pays développants récemment, les accroissements ont varié considérablement dans les pays augmentant l’intérêt d’identifier cette partie d’inflation là qui est due aux causes externes. Ici nous arguons que l’application des suppositions aux pays développants utilisées communément pour des pays développés peut facilement exagérer l’importance relative de l’inflation importée. Particulièrement, pour les pays développants, les déviations de la tendance de production seront une bonne mesure de la demande d’excès pour des nombreuses raisons. Il n’est pas aussi nécessairement vrai que les pays en voie de développement ne peuvent pas stériliser les afflux des changes. Sous ces circonstances, nous démonstrons pour les Philippines qu’une quantité d’équation de prix d’argent peut avoir beaucoup plus de succès de distinguer entre les prix d’importation et les pressions de démande locale comme sources d’inflation.

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Resumen Sobre la medición de la inflaci⤵ importada en países en desarrollo. — Mientras las tasas de inflaci⤵ recientemente se han acelerado en forma acentuada en los países en desarrollo, los aumentos han variado considerablemente a traves de países, elevando el interés por identificar la parte de la inflación debida a causas externas. Aquí se argumenta que la aplicación de supuestos comunmente utilizados para países desarrollados en paises en desarrollo pueden exagerar fácilmente la importancia relativa de la inflación importada. En particular, para países en desarrollo, desviaciones de la trayectoria de productión serán por varias razones una medida poco satisfactoria para el exceso de demanda. Tampoco es necesariamente cierto que los países en desarrollo no pueden esterilizar los flujos de moneda extranjera. Bajo estas circunstancias, como se muestra para las Filipinas, una ecuación preciocantidad de dinero puede ser mucho más exitosa para la distributión entre precios de importatión y presiones de demanda doméstica como fuentes de inflación.

     

Assessing the performance of inflation targeting in East Asian economies

This paper examines the implementation and performance of inflation targeting (IT) in four East Asian emerging market economies: Indonesia, Korea, the Philippines, and Thailand. It also examines monetary policy in Malaysia, a country that has not adopted IT. The study estimates policy reaction functions to test the links between the adoption of IT and use of a monetary policy rule. The impulse responses of prices to a monetary policy shock are also estimated to identify monetary policy impacts on prices. The findings on the monetary policies of the five economies can be summarised as follows. Korea has taken an inflation‐responsive and forward‐looking policy stance under inflation targeting, which has had an effect on the stability of prices. Indonesia and Thailand have conducted inflation‐responsive but backward‐looking policy stances, which have had no impact in terms of price stabilisation. The Philippines (which adopted IT but under a pegged exchange rate regime) and Malaysia have neither followed inflation‐responsive rules nor had policy impacts in terms of controlling inflation.     

欧亚经济联盟(EEU)对中亚国家的影响

欧亚经济联盟(EEU)作为俄罗斯重返世界一极的重要平台,对俄罗斯有着重大战略意义;中亚一直是俄罗斯的战略后院,欧亚经济联盟的成员国虽然只有哈斯克斯坦和吉尔吉斯斯坦,但对该地区其他国家亦有着不同程度的影响,笔者试图从国别的角度,浅析欧亚经济联盟对哈斯克斯坦、吉尔吉斯斯坦、塔吉克斯坦、乌兹别克斯坦、土库曼斯坦的影响。     

The relevance of Chinese developmental experience to developing countries

The Chinese experience and success in economic development during the past 30 years are seen as a model by many underdeveloped countries. Since 1952 China has followed 2 different strategies: 1) the radical approach, emphasizing self-reliance, autarchy, and very limited foreign trade and bureaucracy, and, 2) the pragmatic approach, giving priority to heavy industry, sophisticated technology, and centralized control. Since Chinese politics became deeply intermingled with these 2 lines of thought, there is a certain degree of uncertainty about the final direction that will emerge with a degree of continuity. Obviously, evaluating China's developmental experiences for other countries' purposes is not the same as evaluating them for China's purposes. However, in its totality China has been able to demonstrate the validity of certain goals; the transplanting of Chinese strategies in foreign countries, or the mechnical imitation of Chinese innovations would not work every time; but the adoption of certain innovations, if the proper environment is available, would have a positive impact on developing societies.     

Tax policy and reform in Asian countries: Thailand''s perspective

This paper gives overviews of Thailand's tax system covering major taxes administered by the central government and the local taxes administered by the local government. Recent tax reform experiences are discussed at length starting from the introduction of value added tax (VAT) replacing the business tax to customs tariff reform. Current issues on taxation are also highlighted ranging from tax base, direct and indirect taxation, decentralization impediments. Furthermore, the government is implementing modern and cutting-edge technology in tax administration, thereby providing effective and efficient e-government services to the Thai people. This paper discusses the Roadmap for Tax Reform that would outline the framework for future direction of taxation in Thailand. Finally, the paper gives important insights on tax issues, and draws important conclusions for the future of tax reform in Thailand.     

The government revenue and government expenditure nexus: empirical evidence from nine Asian countries

The nexus between government revenue and government expenditure has been an important topic in public economics. In this paper, we investigate evidence for cointegration and causality between government revenue and government expenditure for nine Asian countries. We use the recently developed bounds testing approach to cointegration and the conventional F-test to examine Granger causality. Our empirical results suggest that for three out of the nine countries government revenue and government expenditure are cointegrated. Our results on the direction of causation are mixed: (a) for Indonesia, Singapore, Sri Lanka in the short-run and for Nepal in both the short- and long-run we find support for the tax-and-spend hypothesis; (b) Indonesia and Sri Lanka are in conformity with the spend-and-tax hypothesis in the long-run; and (c) for other countries there is evidence of neutrality.     

跨越“中等收入陷阱”:东亚的经验及启示

中等收入阶段是一个独特的发展阶段,所有在跨越低收入陷阱管用的政策和发展战略,到了中等收入阶段基本上都不再管用,如果重复使用就会陷入"中等收入陷阱"。日本和亚洲四小龙,在20世纪70年代和80年代也不同程度地依赖以出口为导向的低成本优势战略,但是在进入中等收入序列后这些国家和地区放弃了这一战略,依靠科技进步与人力资源开发,转变经济增长方式,实现产业结构的转型和城乡与地区的均衡发展,促进中等收入阶层的形成以及经济增长动力结构的转变,实现了社会结构和政治民主化转型,保证了经济社会的持续发展,成功地避开了"中等收入陷阱"。     

Monetary discipline and inflation in developing countries: the role of the exchange rate regime

Adherence to a pegged exchange rate regime has the potentialto affect inflation in two ways: by instilling monetary disciplineand by altering the relationship between money and prices, becauseshocks to the money stock are absorbed partly by changes inthe balance of payments. Although the latter is a disequilibriumphenomenon (if balance of payments deficits are unsustainablein the long run), it might still be important in the mediumterm. Evidence on the relative importance and magnitude of thetwo effects is presented, using cross-sectional macroeconomicdata from 80 LDCs. Both effects are found to be significant.     

Evaluating mutual fund performance in an emerging Asian economy: The Malaysian experience

This paper examines the performance of 311 mutual funds from January 1990 to December 2005 in Malaysia by using composite portfolio performance measures, the single market model, the Fama and French three-factor model, and the Carhart four-factor model across investment horizons. Overall, we have found evidence that mutual fund performances yield superior returns with relatively lower systematic risks. A 3-year investment appears to be the preferred investment horizon with the highest annualized returns of 9.23%. The results of the single market model, the Fama–French three-factor model, and the Carhart four-factor model have all indicated that beta, size, book-to-market value, and momentum factors are significant factors in explaining equity fund returns with the Carhart four-factor model being the relatively better model among the three. The beta factor has demonstrated the highest coefficient and significance. The results further indicate that the average equity funds in Malaysia hold smaller market capitalization stocks and value oriented stocks, as well as buying past-winning and selling past-losing stocks.     

Chinese imports and income inequality: evidence from six East Asian economies

The study adopts a mixed‐methods design with quantitative and narrative accounts of inequality formation in Hong Kong, Japan, Macau, Singapore, South Korea, and Taiwan. Imports from China, but not elsewhere, have a strong positive impact on domestic income inequality. With growing volume of cheaper imports, local industries lose competitiveness or even relocate to China in some cases. This paper suggests manufacturing employment as one of the causal pathways from Chinese imports to rising income inequality, as the wage gap between the top and bottom widened following the loss of middle‐wage manufacturing jobs.