Political Economy of the Asia-Pacific Free Trade Area： A Dilemma for China

The Asia‐Pacific Free Trade Area (FTAAP) has become a topic of focus since the proposal was first raised in 2004. The present paper considers China's policy towards the FTAAP from a political economy perspective by probing the gains, impediments and concerns for China, and makes judgments based on several possible scenarios. The author argues that from an economic perspective, China would benefit from joining the FTAAP both in a static and a dynamic manner because both its main trade partners and trade barriers in export markets are concentrated in the Asia‐Pacific region. However, whether the Chinese Government is likely to support the initiative is largely dependent on certain crucial political and diplomatic elements, including the APEC approach, US‐Chinese relations, quality of treaty, sensitive sectors, competitive proposal of alternative and membership of Chinese Taipei. Therefore, if the Chinese Government cannot ratify the ideology and terms of the initiative, or issues that are central to China's interests are not addressed, the FTAAP will only remain a proposal possessing economic possibility in the long run, without political feasibility in the near term.     

The Impact of the U.S. and the Japanese Equity Markets on the Emerging Asia-Pacific Equity Markets

Using a tri-variate vector autoregression model, we study the relationships between the four Asian emerging equity markets: Hong Kong, Korea, Singapore and Taiwan, and the two largest equity markets in the world: U.S. and Japan. We find that while most of the unexpected variations in stock returns in these Asian emerging markets is explained by domestic own shocks, the impacts from the U.S. and Japan are larger in Hong Kong and Singapore than in Korea and Taiwan. This foreign effect is pronounced after the Crash of the October 1987, especially in Singapore. This revised version was published online in August 2006 with corrections to the Cover Date.     

亚太新双边主义兴起的原因研究——一个政治经济学的分析视角

亚太地区双边贸易协定的兴起与演进形成当代亚太区域经济合作发展的新阶段,其意义和影响日益受到国际社会的普遍关注。本文以政治经济学方法为分析工具,对亚太地区双边主义兴起的动因进行剖析和评价,指出亚太地区双边主义的形成是亚太地区各经济体在当前国际政治经济环境约束下,选择最大化自身利益的贸易政策的必然结果。中国应积极参与建立双边自由贸易区;发挥先发优势,谋求以我为主的区域经济一体化进程;协调国家战略与地区战略,平衡经济利益和政治利益。     

Real exchange rate misalignment and business cycle fluctuations in the Asia-Pacific

Real exchange rate (RER) misalignment, which is the deviation between the actual real exchange rate from its equilibrium, occurs frequently among developing countries. Studies have shown that RER misalignment may have negative economic implications, such as a decline in economic growth, exports, and export diversification and an increased risk of currency crises and political instability. Using quarterly data for 22 sample countries from 1990 to 2018, this paper investigates the impact of RER misalignment on business cycles in the Asia-Pacific by employing a panel vector autoregression involving consumer price index (CPI) inflation, output gap, short-term interest rates, and RER misalignment. We find that RER overvaluation may reduce CPI inflation and short-term interest rates. We also find that the Asia-Pacific region is highly heterogeneous in that the output gaps of some countries, particularly from the Southeast Asian region, are more susceptible to RER misalignment shocks.