Nonperforming Loans and Purchase of Loans by Public Asset Management Companies in Malaysia and Thailand

This paper explores the factors which eliminated the nonperforming loan (NPL) problem in Malaysia and Thailand following the 1997 Asian financial crisis. The number of NPL, which expanded in the aftermath of the crisis, has since declined in most South‐East Asian countries. Although previous studies have explored the causes of the increase in NPL numbers, few have analysed the factors that contributed to the reduction in their number in Asia. In Malaysia and Thailand, authorities put in place several measures to manage NPL. As a vehicle to acquire NPL from banks, Malaysia established the Pengurusan Danaharta Nasional Berhad (Danaharta) in 1998, while Thailand established the Thai Asset Management Corporation (TAMC) in 2001. We analyse whether the characteristic features of banks, improvements in macroeconomic conditions, and facilities for purchasing loans caused a reduction in the number of NPL in Malaysia and Thailand. The results suggest that selling loans to a public asset management company was effective in reducing the number of NPL in Thailand. While macroeconomic conditions influenced the decline in NPL ratios in Thailand, in Malaysia, well performing commercial banks and large commercial and investment banks generally had smaller NPL ratios throughout and following the crisis.     

A cross‐country study on the relationship between financial development and earnings management

This study investigates whether a country's level of financial development is associated with earnings management in an international setting. Financial development is likely to heighten the monitoring and scrutiny of accounting numbers because of strengthened investor protection laws and regulations as well as sophisticated market participants. Therefore, we first hypothesize that both accrual‐based and real earnings management decrease with greater financial development. However, research shows that managers tend to apply real earnings management, instead of accrual‐based earnings management, under strict accounting standards, regulations, and close auditor scrutiny. Thus, we explore the alternative hypothesis that accrual‐based earnings management decreases but real earnings management increases along with higher financial development. We examine the relationship between financial development and both types of earnings management using 56,830 observations in 37 countries covering the period 2009–2012. The results indicate that both types of earnings management are more restrained under higher levels of financial development.     

Optimal steady-state in stationary consumption-loan type models

We consider a stationary overlapping generations economy, and prove that an optimal steady state exists. We show that if a government intervention is needed in order to implement the optimal steady state as a competitive equilibrium, it is necessary only in a finite number of periods. If the interest rate associated with the optimal steady state equals the population rate of growth, some outside money may be required in order to make the competitive equilibrium follow the optimal steady state. We show that our existence result enables us to construct Pareto optimal competitive equilibria in some important cases.     

Welfare implications of commodity price stabilization with partially flexible production,private storage and buffer-stock costs

Zusammenfassung Wohlfahrtsimplikationen einer Stabilisierung der Güterpreise bei partiell flexibler Produktion, privater Lagerhaltung und Kosten einer buffer-stock-Politik. - In diesem Aufsatz wird die traditionelle Literatur von Waugh-Oi-Massell zur Stabilisierung der Güterpreise auf ein Modell mit rationalen Erwartungen ausgedehnt, das eine partiell flexible Produktion, eine private Lagerhaltung zu Wettbewerbsbedingungen und die Kosten der Stabilisierungsbeh?rde für ihre buffer-stock-Politik umfa\t. Die Stabilisierung der Preise verbessert die Wohlfahrt jeder Gruppe, wenn die St?rungen im eigenen Bereich auftreten, vermindert aber die Wohlfahrt, wenn die St?rungen die Nachfrage oder das Angebot anderer Gruppen betreffen. Der private Sektor insgesamt gewinnt unzweideutig von der Preisstabilisierung, w?hrend die Stabilisierungsbeh?rden immer verlieren. Die Preisstabilisierung mag vielleicht die gesamte Gesellschaft (d.h. den privaten und den ?ffentlichen Sektor) einige Zeit besserstellen, im Endergebnis dürfte sie aber einen Verlust an potentieller sozialer Wohlfahrt verursachen.

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Résumé Des implications de bien-être d’une stabilisation de prix avec production partiellement flexible, stockage privé et co?ts de stock régulateur. - Cet article étend la littérature traditionnelle de Waugh-Oi-Massell sur la stabilisation de prix à un modèle d’expectative rationnelle qui inclut une production partiellement flexible, un stockage privé compétitif et des co?ts des autorités pour les opérations de stock régulateur. Une stabilisation de prix améliore le bien-être de chaque groupe, si les perturbances se passent dans leurs domains, mais elle réduit le bien-être si les perturbances affectuent la demande ou l’offre d’autres groupes. Le secteur privé en ensemble gagne sans aucun doute de la stabilité de prix pendant que les autorités de stabilisation perdent toujours. Une stabilisation de prix pourrait améliorer la situation de la société entière (c.-à.-d. les secteurs privés et publiques) pour quelque temps, mais éventuellement pourrait générer une perte de bien-être potentiel social.

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Resumen Implicaciones para el bienestar de la estabilización de precios de materias primas bajo productión parcialmente flexible, almacenamiento privado y costos de buffer stocks. - Este trabajo extiende el modelo traditional de Waugh-Oi-Massell de estabilización de precios de materias primas a uno de expectativas racionales con production parcialmente flexible, almacenamiento privado competitivo y costos de operaciones buffer stock. La estabilización de precios aumenta el bienestar de cada grupo con respecte a sus propias perturbaciones y reduce el bienestar con respecte a perturbaciones que inciden sobre la demanda o la oferta de otros grupos. El sector privado claramente gana con precios estables, mientras que las autoridades responsables de la estabilización siempre pierden. La estabilización podría mejorar el bienestar de la sociedad entera (o sea de los sectores privado y estatal) por un eierte tiempo, mas posiblemente daría lugar a una pérdida potencial de bienestar social.

     

The Role of Nominal Anchor Currencies in Exchange Rate Arrangements

This paper studies the evolution of exchange rate arrangements of almost all countries in the world over the period 1970–1996. It examines both officially reported and empirically observed exchange rate arrangements. Several findings are obtained. First, the relative economic size of countries under fixed exchange rate regimes has not declined as dramatically as the measure based on reported arrangements would indicate. Second, the U.S. dollar has been the most dominant, global anchor currency because many developing economies, particularly those in Asia, Latin America, and the Middle East, have attempted to stabilize their exchange rates to the dollar. Third, the reserve currency composition is determined by the constructed measure of the net currency-area size in addition to the own-economic size of the reserve currency country. Fourth, as a result of the transition to the final stage of EMU, the euro is expected to emerge as the world's second most dominant anchor currency. While the Japanese yen will continue to play a less significant role as nominal anchor, its role in East Asia is expected to rise gradually.J. Japan. Int. Econ.December 1998,12(4), pp. 334–387. World Bank, 1818 H Street, N.W., Washington, DC 20433 and Institute of Social Science, University of Tokyo, 7-3-1 Hongo, Bunkyo-ku, Tokyo 113, Japan.Copyright 1998 Academic Press.Journal of Economic LiteratureClassification Numbers F31, F33, F36.     

Quality of Governance and the Formation of Preferential Trade Agreements

This paper investigates economic and political factors which explain the presence or absence of preferential trade agreements (PTAs). A model of three countries with imperfect competition markets is employed for theoretical analysis of political economy. The validity of theoretical results is tested by econometric analysis with a logit model. It is shown that countries with similar incomes are more likely to form PTAs, and that governments with low quality of governance have little incentive to form PTAs.     

On labor incentives and work norm in Japanese firms

In this paper, we argue that social/corporate norms play an important role in achieving higher productivity and better economic welfare. We define “social norm” to be a standard of behavior suggested by a social custom, i.e., a customary choice of actions in each social situation. We reinterpret the well-known Nash equilibrium as a “norm equilibrium.” A norm equilibrium is a stable social norm, stable in the sense that there is no incentive to deviate from the behavior suggested by the prevailing social norm. This interpretation requires less information than the traditional interpretation. Moreover, we need not be concerned with the problem of refinement because it is the social norm itself which refines the equilibria. We apply this concept to the labor market. The key assumption is that the level of an individual worker's effort is private information known to workers as a whole; i.e., all workers' efforts are known to their fellow workers as well as to the workers themselves. We show that different work norms may emerge in different corporations at an equilibrium. In “prestigious” firms cooperation is the prevailing work norm, while in “nonprestigious” firms noncooperation is the norm. Thus, the efficiency wage hypothesis holds without the existence of unemployment. Some implications of this interpretation for the Japanese labor markets are discussed.     

On stationary overlapping generations models

Consider a stationary consumption–loan economy with fixed amount of fiat money. We show that although the economy is stationary if the number of goods and the number of ‘types’ of consumers are larger than one, there might be no Pareto optimal stationary competitive equilibrium.