FINANCIAL INTEGRATION IN EAST ASIAN EQUITY MARKETS

Abstract.  This paper examines the degree of financial integration that exists in East Asian equity markets using the International Capital Asset Pricing Model methodology. We employ three market portfolios to test for integration: the weighted average equity index of all sample countries, the Japanese market index and the US market index. The study shows that the level of financial efficiency and the integration of sample countries is high and has improved significantly during 1991 to 2005, and they are more financially integrated within the region and with the Asian leading market (Japan) than with the world leading market (the USA).     

IDENTIFYING INTERDEPENDENCIES BETWEEN SOUTH-EAST ASIAN STOCK MARKETS: A NON-LINEAR APPROACH

This paper considers the question of how shocks to returns are transmitted across South-East Asian equity markets. Using a reasonably general statistical model our results suggest that a negative-return innovation leads to higher levels of domestic volatility than a positive innovation of equal magnitude. There is strong evidence that returns shocks are transmitted across markets, impacting not only on prices, but also on volatility. Any shock, positive or negative, serves to raise volatility.     

THE EAST ASIAN CURRENCY CRISIS: CAUSES AND LESSONS

Financial deregulation and capital-account liberalization preceded speculative currency attacks in Thailand. A combination of de facto fixed exchange rates and high rates of interest generated excessive capital inflows, which led to too much liquidity chasing bad investments. The under-supervised and over-guaranteed financial sector extended loans excessively, particularly for non-productive, speculative purposes. Non-transparent practices, in the form of weak disclosure of institutions' true balance sheets and insider relations, masked these poor investments. The buildup of short-term, unhedged debt left East Asian economies vulnerable to a sudden collapse of confidence. Currency attacks ran down official foreign exchange reserves. Rapid capital outflows and the consequent depreciation of currencies exacerbated the strains on private sector balance sheets. The policy lessons are to (i) use macroeconomic policy to avoid excessive capital inflows and currency overvaluation, (ii) strengthen the financial system, with proper disclosure and accounting requirements, stringent loan classification and provisioning rules, and capital adequacy requirements, prior to capital-account liberalization, (iii) stabilize exchange rates based on currency baskets that reflect trade and investment linkages, and (iv) develop regional. financial cooperation with regional surveillance and peer pressure to maintain policy discipline.     

全球化与20世纪90年代以来东亚制造业的转移和重组

本文的目的是:(1)讨论当存在产业内贸易时,三个通常用来衡量比较优势和竞争力的指标之间的关系;(2)检验20世纪90年代以来,东亚几个经济体中制造业活动的转移和重组。结果显示,制造业活动已经从日本、韩国和台湾地区转移到了中国。对于低技术劳动密集的产业(例如,SITC82,83,84和85),这种转移是基于比较优势,而产生了产业间贸易。然而,对于更复杂的技术密集产品(例如:SITC72和SITC87),生产过程已被分成很多模块,并在不同的国家进行生产。这种制造方式的重组是基于规模经济效应,而产生了产业内贸易。     

PARADIGM SHIFT: A MEAN FIELD GAME APPROACH

This paper analyses the consequences of young researchers' scientific choice on the dynamics of sciences. We develop a simple two state mean field game model to analyse the competition between two paradigms based on Kuhn's theory of scientific revolution. The dynamics of the model are driven by the scientific choice of young researchers at the beginning of their career. Despite the possibility of multiple equilibria, the model exhibits at least one stable solution in which both para digms coexist. The occurrence of shocks on the parameters may induce the shift from one paradigm to the other. During this shift, researchers' choice is proved to be having a great impact on the evolution of sciences.     

CHOICE,CONFUSION AND COMPETITION IN THE MARKET FOR MARKETS: AIMING FOR AIM IN THREE JUNIOR ASIAN STOCK EXCHANGES

Abstract. A review of literature on the theory of stock exchange competition provides the basis for a template model of a successful stock exchange. Three junior stock exchanges in East Asia which stated their ambitions to become a regional exchange for emerging firms are compared with the template and with the AIM section of the London Stock Exchange; the Tokyo Stock Exchange Mothers, Hong Kong Stock Exchange Growth Enterprise Market and the Singapore Exchange Catalist. Our analysis indicates that the AIM and Catalist markets have the closest fit to our template model, while the GEM and Mothers show material departures from it.     

FLOWS OF THE PACIFIC: ASIAN FOREIGN EXCHANGE MARKETS THROUGH TRANQUILITY AND TURBULENCE

Using the longest data set on foreign exchange (FX) order flow to date, along with the broadest coverage of currencies to date, we examine the effect of FX order flow on exchange rates across small and large currencies, currencies with floating or fixed regimes, and across both tranquil and turbulent periods. Over our 15 years of data for 11 Asian and Australasian currencies, we find that order flow has a potentially strong impact on all exchange rates in the sample. The effect is strongest on floating exchange rates, both economically and statistically, but is sizeable also on the other exchange rates, especially during periods of turbulence. By creating a measure of regional order flow, we show that all exchange rates depreciate as flows are moved out of Asia/Australasia and into US dollars. This is true both across regimes and if their own flow is not included in the structure of the regional flow.     

ATTRACTING FOREIGN PARTICIPATION IN ASIAN LOCAL CURRENCY BOND MARKETS: THE CASE OF THE ASIAN BOND FUND 2 INITIATIVE

The Asian Bond Fund 2 (ABF2) is a $US2bn initiative by a group of central banks in Asia and the Pacific. To promote local currency government bond markets, the fund has been investing in 8 such markets in the region. These markets have made impressive strides since the fund's inception in 2005. The improvements may be traced in large part to overcoming a number of market impediments, including barriers to cross‐border investment. The ABF2 project has played an important catalytic role in market reforms aimed at removing these impediments. However, while the government bond markets have come of age, the corporate bond markets have remained immature. To develop, the immature markets would likely require the benefits of further opening up to regional issuance and investment flows.     

CONTRACEPTION AND DEVELOPMENT: A UNIFIED GROWTH THEORY

This study investigates the interaction of the use of modern contraceptives, fertility, education, and long‐run growth. It develops an economic model that takes into account that sexual intercourse is utility enhancing and that birth control by modern contraceptives is more efficient but more costly than traditional methods. The study shows how a traditional economy, in which modern contraceptives are not used, gradually converges toward a high growth regime, in which modern contraceptives are used. Lower prices or higher efficacy of contraceptives are conducive to an earlier onset of the fertility transition and a quicker takeoff to modern growth.     

MARKETS AND THE ENVIRONMENT: A CRITICAL REAPPRAISAL

The environmental problem is no different from any other economic problem. The basic problem is scarcity. Wants are unlimited while resources are limited. Once we recognize our inability to satisfy all of our ecological wants, how do we decide which wants we will satisfy? Most efforts to address environmental concerns have used political institutions to answer this question and to devise policy responses. Environmental concerns have been addressed in the same manner that socialist nations sought to address broader economic concerns. This paper argues that such policies cannot succeed in the environmental realm any better than they did in the broader economic realm. Whether the political approach chosen relies on command-and-control or “market-based” mechanisms (eco-taxes or eco-quotas) matters little in resolving government's inability to prioritize. The dispersed nature and enormity of information needed to prioritize risks and the inability of government to create the rich system of incentives necessary to mobilize human ingenuity renders effective government controls infeasible. This paper argues for greater attention to environmental problems but concludes that we can better address environmental quality by integrating ecological resources into the economy via ecological privatization. This property rights approach to environmental policy—“free market environmentalism”—may entice more economists to address the important environmental questions and devise more appropriate solutions.     

SATISFICING AND SEQUENTIAL TARGETS IN ECONOMIC POLICY: A POLITICO-ECONOMIC APPROACH

The standard optimising framework has difficulties in explainingmacroeconomic policy phenomena in some countries, such as long-termspiralling public debts and sequential setting of policy targets.Moreover, it has not responded convincingly to some common criticisms,such as the question of symmetry, and the failure to accountfor the existence of policy-lobbying groups. This paper suggeststhat a satisficing approach to economic policy is a possibleway of accommodating all the above. This approach combined withpriority target setting has been used in other social sciences.It concentrates on the concepts of sequential attention to policyobjectives and ‘satisfactory’ macroeconomic targets.It also provides a choice theoretical framework as a foundationof the satisficing approach to economic policy. A simple exampleof a satisficing sequential target model is presented. Thereis also an attempt to link other alternative approaches, suchas politico-economic models, with this framework.     

DEMOGRAPHIC SHIFT,POPULATION AGEING AND ECONOMIC GROWTH IN CHINA: A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS

Abstract. Using a computable general equilibrium (CGE) model and a given ageing profile of the population to forecast the growth path of China's economy during the twenty‐first century, this study finds that: population ageing leads to declining economic growth as labour supply shrinks and the rate of physical capital formation declines; households’ material living standards improve, albeit at a declining rate; falling domestic investment partially offsets declining national savings; and the resulting saving‐investment surplus generates a current account surplus and capital outflows. Finally, the main force that can sustain China's economic growth against the backdrop of population ageing is productivity improvement.     

ETHNIC ENCLAVES AND LABOR MARKETS: AN ANALYSIS OF IMMIGRANT OUTCOMES IN CALIFORNIA

The goal of this article is to examine how immigrant enclaves influence labor market outcomes. We examine the effect of ethnic concentrations on earnings in the state of California. Individual-level wage equations that control for several observable human capital and demographic characteristics are estimated. In addition, we introduce a measure that captures an ethnic group's proportion of the metropolitan area population. In general, we find that any potentially positive enclave effects are likely to be offset by negative labor market competition effects. In particular, most enclave effects become insignificant after controlling for metro area–specific effects . ( JEL J61, J31)     

地理信息系统在区域商业和经济中的应用初探

有效地开发和利用地理空间数据，可以优化配置资源，降低商业运行成本，并规划、监测、改善区域商业和经济环境。而地理信息系统，不仅是关于地理数据的获取、存储、转换、分析和表示的原则、方法和工具，而且提供了认识空间现象的思维方式和解决空间问题的方法，可用于定义、分析、表现复杂的空间经济现象。基于这样的认识，本文试图从理论上探讨地理信息、商业环境和区域经济发展间的关系，并结合中国广东的区域经济状况，初步分析地理信息系统在商业和区域经济中的潜在应用。     

COST FUNCTIONS AND COST EFFICIENCY IN ELECTRICITY DISTRIBUTION: A STOCHASTIC FRONTIER APPROACH*

The paper develops a cost frontier model of electricity distribution and estimates it on data for the 12 regional electricity companies of England and Wales. It is found that some significant cost drivers in cross-section estimation are insignificant when the model is estimated on panel data, highlighting the well-known drawbacks of cross-section estimation. Panel data estimation suggests that the main determinants of distribution operating costs are the number of customers in the area and simultaneous maximum demand. These results and the efficiency rankings of the companies are not sensitive to changes in error distribution assumptions and sample size. There is also significant evidence of economies of scale. There is a small but significant effect on cost efficiency from privatization, but this is as likely to be due to the changes in accounting policies at the time of privatization as any real effect.