VALUE CONTENT AND PRODUCTION NETWORKS IN SOUTHEAST ASIA: APPLICATION OF AFTA AND ASEAN‐PLUS‐ONE FTA FORMULAS

Rules of origin are an integral part of all trade rules. To be eligible for Common Effective Preferential Tariffs under the ASEAN Free Trade Area (AFTA) agreement, a product must satisfy the conditions relative to value content. The present paper seeks to calculate value content of industries in Southeast Asia, using the formula specified by the rules of origin in AFTA, the ASEAN–China FTA, the ASEAN–Korea FTA, and the ASEAN–Japan FTA. Moreover, the paper attempts to calculate true value content of industries by applying a simple technique of input–output analysis, and to estimate error margins (i.e., overestimates) in calculating value content. The paper also examines the relationship between value content and production networks. The paper finds that many industries exhibited declines in local content during the period 1990–2000, but that the geographical spread of production networks raised the proportion of inputs supplied by the neighboring ASEAN countries, so that the contribution of the cumulative rule of origin increased.     

Structural change in the United States: Social accounting estimates for 1982–1988

During the 1980's, extensive structural adjustments took place in the U.S. economy. This paper uses estimates of sectorally detailed social accounting matrices to evaluate the changes in receipt and expenditure patterns, including interindustry linkages, over the 1982–1988 period. Among other effects, our results reveal increasing service orientation, shifts in energy use, and increased import and foreign investment dependence. Detailed evidence on direct and indirect demand linkages indicates large shifts in the composition of government expenditure and private investment, the latter being intensified by declines in the rate of domestic capital formation.We would like to thank Greg Alward for the 1982 IMPLAN input-output data, Norman Bakka for the National Income and Product Account Data, Ken Hanson for helpful suggestions, Mark Planting for 1985 BEA input-output data, Valerie Personick for the activity output data, and two anonymous referees for helpful comments.     

TARIFFS,SUBSIDIES, AND PROFITS: A RE‐ASSESSMENT OF STRUCTURAL CHANGE IN AUSTRALIA 1901–39

We re‐interpret the drivers of structural change in Australia from Federation to World War II. Manufacturing increased its relative share of output and employment, the farm sector and mining contracted. Conventional wisdom contends these shifts largely resulted from government policy, particularly increases in trade barriers. We contend that the connection between tariffs and increased profitability is conceptually weak and not supported by extant evidence. We argue that exogenous shifts in consumer preferences, the adoption of new technologies, changing factor proportions, and greater specialisation in manufacturing and services were responsible for manufacturing increasing its share of the economy's resources and output.     

Exact and asymptotic tests for possibly non-regular hypotheses on stochastic volatility models

We study the problem of testing hypotheses on the parameters of one- and two-factor stochastic volatility models (SV), allowing for the possible presence of non-regularities such as singular moment conditions and unidentified parameters, which can lead to non-standard asymptotic distributions. We focus on the development of simulation-based exact procedures–whose level can be controlled in finite samples–as well as on large-sample procedures which remain valid under non-regular conditions. We consider Wald-type, score-type and likelihood-ratio-type tests based on a simple moment estimator, which can be easily simulated. We also propose a C(α)-type test which is very easy to implement and exhibits relatively good size and power properties. Besides usual linear restrictions on the SV model coefficients, the problems studied include testing homoskedasticity against a SV alternative (which involves singular moment conditions under the null hypothesis) and testing the null hypothesis of one factor driving the dynamics of the volatility process against two factors (which raises identification difficulties). Three ways of implementing the tests based on alternative statistics are compared: asymptotic critical values (when available), a local Monte Carlo (or parametric bootstrap) test procedure, and a maximized Monte Carlo (MMC) procedure. The size and power properties of the proposed tests are examined in a simulation experiment. The results indicate that the C(α)-based tests (built upon the simple moment estimator available in closed form) have good size and power properties for regular hypotheses, while Monte Carlo tests are much more reliable than those based on asymptotic critical values. Further, in cases where the parametric bootstrap appears to fail (for example, in the presence of identification problems), the MMC procedure easily controls the level of the tests. Moreover, MMC-based tests exhibit relatively good power performance despite the conservative feature of the procedure. Finally, we present an application to a time series of returns on the Standard and Poor’s Composite Price Index.