Inflation and economic growth: A dynamic panel threshold analysis for Asian economies

This paper investigates the existence of a threshold level for inflation and how any such level affects the growth of Asian economies. We use a dynamic panel threshold growth regression, which allows for fixed effects and endogeneity. We observe a nonlinear relationship between inflation and economic growth for 32 Asian countries over the period 1980–2009. We detect an inflation threshold of approximately 5.43%, at a 1% level of significance. We find that inflation hurts growth when it exceeds 5.43% but has no effect below this level. Different estimation methods determine that the effect of inflation on growth is robust. Our findings may be useful to central banks as a guide for inflation targeting.     

Does rapid economic growth enhance democratization? Time-series evidence from high performing Asian economies

We examine the long-run relationship between economic growth and democratization for the high performing Asian economies using a time-series technique called the autoregressive distributive lag bounds test. For all eight of such economies, we do not find a statistically significant long-run relationship running from growth to democratization. Instead, we find a statistically significant long-run relationship running from democratization to growth, which can be either positive or negative. Contrary to the conventional wisdom, our results suggest that rapid economic growth in the high performing Asian economies appears to have little effect on democratization in the long run.     

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.     

Electricity Generation and Economic Efficiency: Panel Data Evidence from World and East Asian Countries

Abstract

This paper investigates the effect of electricity generation on countries’ economic efficiency. By using a sample of 42 World and East Asian countries for the time period 1996–2006 the paper employs Data Envelopment Analysis (DEA) window analysis and econometric panel techniques. The results reveal that there is an inverted U-shape relationship between electricity generation and countries’ economic efficiency. Finally, the turning point for the European countries is much smaller compared to the one of East Asian countries indicating that the European countries shift in energy use from electricity to other sources of energy. In addition the electricity generation–economic efficiency relationship depends also on the structure of the economy.     

Bank market power, economic growth and financial stability: Evidence from Asian banks

This paper examines whether Asian banks are still prone to moral hazard in the aftermath of the 1997 Asian crisis. Using a sample of commercial banks from 12 Asian countries during the 2001–2007 period, our empirical findings highlight that greater market power in the banking market results in higher instability. Although banks are better capitalized in less competitive markets their default risk remains higher. A deeper investigation however shows that such behaviour is dependent on the economic environment. Higher economic growth contributes to neutralize greater risk taking and higher instability in less competitive markets.     

Lessons from the euro zone for the East Asian economies

This paper endeavors to contribute to the solution of the following critical issues: (1) what the East Asian nations can do in cooperation among themselves and with China, Japan, and South Korea in their foreign trade arrangements to improve the stability and growth of their economies; (2) what they must do individually to get their financial and real economies better integrated; (3) what they can do in cooperation with China, Japan and South Korea—bilaterally and regionally—to modernize their monetary systems and to render them more resilient to financial crises; and (4) what new focus of the IMF is most likely to enable the East Asian nations to maintain relatively free and open economies without the impact of catastrophic financial crises. Lessons from the development of the European Union, the dynamics of the euro zone, the experience of the Bank for International Settlements, and recent research on monetary and international macroeconomic theory are drawn upon to provide answers to these questions. It is argued that an area-wide approach, with a new IMF regional role and the formation of an East Asian Monetary Authority, would contribute to a sense of “community” within East Asia, leading to an enhanced role for both East Asia and ASEAN + 3 in the new world economic order.     

Foreign capital flows and economic growth in East Asian countries

This paper provides a quantitative assessment of the effect of various types of capital flow on the growth process of the East Asian countries, including China. The empirical analysis was based on dynamic panel data and we found; first, that domestic savings contribute positively to long-term economic growth. Second, we confirmed that FDI is growth enhancing and that its impact is felt both in the short and long run. Additionally, FDI influence on growth is much higher than domestic savings. Third, short-term capital inflow has adverse effect on the long-term as well as short-term growth prospects and it appears to be sensitive to long-term capital inflows. Fourth, long-term debt has positive effect on growth but its effect does somewhat disappear in the long-term. By and large, the observed positive contribution of FDI in the growth process of East Asian economies is a robust finding. From policy perspective, the evidence convincingly suggests that countries that are successful in attracting FDI can finance more investments and grow faster than those that deter FDI.     

Efficiency change and productivity growth in agriculture: A comparative analysis for selected East Asian economies

This study focuses on identifying the sources of agricultural growth for eight East Asian economies – with special emphasis on factors that can better explain different components of growth. The Malmquist productivity growth index and its two components are calculated and regressed on variables including the human capital endowment, domestic R&D, international spillovers, and country-specific farming characteristics to characterize the differential patterns of growth. Our empirical evidence suggests that domestic R&D and its interaction with human capital constitute the major determinant of individual economy's progress in agricultural technology, whereas the human capital endowment is crucial for the catching up effect. Furthermore, for foreign knowledge to contribute to productivity growth either through innovation or through catching up, the host economy has to develop a sufficient learning capacity from education. Countries that do not attempt to develop the learning capability to assimilate and exploit the freely available knowledge may not benefit from international spillovers of agricultural R&D.     

Regionalism and East Asian economic integration

The wave of economic globalization moves to all the countries in the world to be integrated with multilateralism and by promotion of the General Agreement on Tariffs and Trade/World Trade Organization （GATT/WTO）. Meanwhile, the growth of regional economic integration has been one of the major developments in international economic relations, and undoubtedly regionalism is a part of the global economic environment. The objective of the paper is to review the trends and highlight the prospects for enhancing economic integration in East Asia. This paper has argued that the emerging East Asian economies have achieved sustained economic development and poverty reduction through domestic structural, institutional and governance reforms as well as through market-driven integration with the global and regional markets. Though this process was temporarily interrupted by the Asian financial crisis in 1997-1998, the economies have pursued further liberalization and reforms, deepened economic integration through trade, FDI and finance, and regained dynamic growth. The author argues that the reasonable choice for Eastern Asian countries is to deepen their economic integration and the optimal strategy is fostering economic integration with institutional cooperation.     

Financial development and economic growth: Evidence from China

This paper investigates the relationship between financial development and economic growth for the case of China over the period 1952–2001. After considering the time series characteristics of the dataset, a multivariate vector autoregressive (VAR) framework is used as an appropriate specification and the long-run relationship among financial development, growth and other key growth factors is analyzed in a theoretically based high dimensional system by identification of co-integrating vectors through tests of over-identifying restrictions. The empirical results suggest that there exists a unidirectional causality from economic growth to financial development, conclusions departing distinctively from those in the previous studies.     

East Asian economic development: Two demographic dividends

Countries throughout the world are experiencing changes in their population age structure, but they are particularly rapid in East Asia. During the last part of the 20th Century the region benefited from an increased concentration of population in the working ages. Population aging is now the increasing rapidly with potentially adverse economic effects. The evidence presented here shows that population aging can lead to a second demographic dividend because population aging may lead to rapid capital accumulation. This appears to have occurred in East Asia because public support systems for the elderly are smaller and because family support systems are in decline.     

Religion and Educational Attainment in East Asia: First Evidence from the East Asian Social Survey

Abstract

In this research note, I analyse the effects of religion on educational attainment in four East Asian countries (China, Japan, Korea and Taiwan) using the East Asian Social Survey. Controlling for a host of background variables, ordinary least squares (OLS) estimates of educational attainment show that Catholics and Orthodox Christians have on average more education than those with no religious affiliation, while the followers of other Eastern religions (including, among others, Taoism and syncretistic beliefs) have on average less education. The effects for Protestantism and Buddhism differ across the four different countries, probably because they both include various denominations and schools.     

Asian Currency Crisis and the Generalized PPP: Evidence from the Far East

The present paper investigates the effects of the Asian currency crisis of 1997–1998 on the generalized PPP between several real exchange rates of the Far East countries. Monthly log of real exchange rates of the currencies of Thailand, Malaysia, Indonesia, the Philippines and South Korea vis-à-vis the US dollar and the Japanese yen during 1990–2004 are applied in the investigation. Further tests are conducted between exchange rates vis-à-vis the Thai baht. Tests are conducted for periods before and after the crisis. Results from the Johansen method of multivariate cointegration show a substantial change in the relationship between these real exchange rates before and after the Asian currency crisis. This result is found using rates based on three currencies: US dollar, yen and baht.     

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.     

Foreign Investment and East Asian Economic Development

This article surveys and anabses the very lure literature on direct foreign investmenl (DFI) in the developing economies of East Asia and the Southwest Pacifi. Commencing with an overview of the MNC (mufcinafional corporation) presence in the region, successive sections a-amine patterns and performance of major investors, trude-DFI interrelationships, the impact of DFI on market structure and peflormance, the modalities of MNC entry, and host country policy. The latter, it is argues, is criticully importunt for assessments of the costs and benefits of DFI.     

东亚经济一体化与合作：朝向共同体

长期以来,东亚地区的经济一体化主要靠市场力量推动,区域经济合作则落后于经济一体化进程。亚洲金融危机证明,仅靠市场推动的经济一体化是脆弱的,只有加强区域经济合作,东亚地区才能增强抵御外部风险的能力,保持经济的持续繁荣。亚洲金融危机后,东亚地区迅速建立起“10 3”的合作机制,在加强金融领域合作的同时,也不断拓展在经贸投资等领域的合作,并逐步确立了以建立东亚自由贸易区和东亚共同体的长远奋斗目标。特别是在中国提出与东盟建立自由贸易区后,东亚地区的合作步伐明显加快。尽管目前离建立东亚共同体的长远目标还很遥远,但东亚地区的合作进程已不可逆转,各种形式的合作努力将最终推动长远目标的实现。     

The East Asian model of economic development

Unlike existing models of the rapid growth of the East Asian economies that are based on stylised facts, this paper formulates a model by introducing an all‐encompassing (core) variable that explains the unique path to success in East Asia. Using three propositions, the model explains the transition from a backward economy to an industrial economy. Central to the model is policy‐augmented human capital (PAHC)—human capital with a road map for development—led by a capable leader. The model is unique in that it validates the critical role of human capital in a time of ‘high development theory’ when the emphasis was skewed towards the accumulation of physical capital, and the role of government at a time when interventionist policies were either failing elsewhere (in the 1950s and 1960s) or facing opposition (in the 1970s and 1980s). The success of the East Asian model provides evidence pointing to a preference for economic development over democracy.     

The growth path of the dynamic Asian economies

The rapid and sustained growth of several Asian economies led researchers, policymakers, and decision‐makers in the world of international business to search for a plausible Asian model of growth. Numerous explanations of the dynamic growth in Asia have been put forward, including the ‘new structuralist’ approach proposed by Lin (2012). This paper examines the various explanations of what these countries did to unleash their growth potential. Industrial policy and market intervention are two such explanations. While the dynamic Asian economies did not flout the Washington Consensus, they adapted it in different ways. The policies that they followed under the Beijing Consensus allowed them to proactively follow pro‐business policies. They also exploited the concepts of economic statism or state capitalism, which became an integral part of what became known as the ‘Asia model’.     

Aid and economic growth in LDCs: Evidence from Sub-Saharan Africa

This paper uses a disaggregated cross-national time-series aid data and a Least Squares Dummy Variables (LSDV) model to investigate the effects of aid on economic growth in Sub-Saharan Africa. We find that, contrary to what some critics of aid argue, aid has a small but positive and significant effect on economic growth in Sub-Saharan Africa. A simultaneous equation specification of the model shows that aid affects economic growth in Sub-Saharan Africa directly and indirectly through increased domestic savings and investment.