Regional Issues in Environmental Management

This paper addresses environment management in East Asia. We first set out to examine whether the latecomer’s economies in East Asia enjoy technological spillover effects or suffer pollution haven damages in their environmental pollution management, in other words, which of latecomer’s advantage or latecomer’s disadvantage for pollution control dominates in East Asian economies. We found two contrasting results among the environmental indices: 1) per capita consumption of ozone-depleting substances and industrial organic water pollutant emissions indicate monotonic decreasing trends with per capita real GDP while per capita carbon dioxide emissions show monotonic increasing trend, and 2) consumption of ozone-depleting substances and industrial organic water pollutant emissions represent the dominance of the latecomer’s advantage while carbon dioxide emissions reveal that of the latecomer’s disadvantage. We second discuss what the regional framework of environmental cooperation should be in East Asia. We argue that non-binding approach as regional framework of environmental cooperation may be an optimal choice for East Asia, in the sense that it provides the “easier”, “faster” and “deeper” framework regardless of economical, political, and historical constraints

Analysis of ‘Dutch Disease Effects’ on Asian Economies

This chapter addresses the issue of the Dutch Disease in relationship with capital inflows through exporting natural resources, accepting foreign aids and emigrant remittances. The analysis focuses on Asian economies that are expected to sustain their growth and adopts a vector auto‐regression model with Granger causality and impulse response tests. The main findings are as follows. Firstly, from the perspective of natural‐resource abundance in Asian economies, the Dutch Disease was identified for 1980–1995, but not for 1995–2014, probably because of their institutional improvements. Secondly, in the economies of Cambodia, Lao PDR, Myanmar and Vietnam, their accepted foreign aids have not caused the Dutch Disease and have rather promoted their economic growth, due to their aid contributions to infrastructure development. Thirdly, regarding the Dutch Disease effects of emigrant remittances, the disease was verified in Nepal but not in Bangladesh, due to their different demand structures and policy efforts

Monetary Policy Rule and Taylor Principle in Emerging ASEAN Economies: GMM and DSGE Approaches

This paper aims to reassess the performances of inflation targeting adopted by emerging ASEAN countries, Indonesia, the Philippines and Thailand, by examining their monetary policy rules, both through generalized-method-of-moments (GMM) estimations of policy reaction functions and through Bayesian estimations of the New Keynesian dynamic-stochastic-general-equilibrium (DSGE) model. The main findings are summarized as follows. First, the GMM estimations identified inflation-responsive rules fulfilling the Taylor principle, with a forward-looking manner in Indonesia and Thailand and with a contemporaneous way in the Philippines. Second, the Bayesian estimations of the New Keynesian DSGE could reassure the GMM estimation results, as the former estimations produced consistent outcomes with the latter ones on the policy rate reactions to inflation with the Taylor principle

The Post-crisis Exchange Rate Management in Selected East Asian Countries - Flexibility of Exchange Rate and Sensitivity to Inflation Rate?

The 1997-98 Asian crises have refocused attention on exchange rate management of East Asian countries. Most views expressed criticize the pre-crisis US dollar peg regime as one of the causes of the crisis. Then, the question arises as to whether, after the crisis, the East Asian countries are simply returning to the pre-crisis US dollar standard, or whether they have learned a lesson from the crisis and are finding another path to follow. This article examines post-crisis exchange rate management in selected East Asian countries. The main findings are as follows: First, we found that the exchange rate flexibility of all the sample countries has increased from the pre-crisis period towards the post-crisis period. Second, we further found that the post-crisis managed exchange rates of Korea, the Philippines, Thailand have been sensitive to domestic inflation rates, and that Korea has raised the weight assigned to the Japanese yen while reducing the US dollar dominance in her post-crisis exchange rate management. Third, we cannot necessarily say that there is robust evidence that a regional coordination in the sample countries’ exchange rate management has been strengthened as a whole in the post-crisis period.

Exchange rate regime and real exchange rate behavior

This paper examines exchange rate regimes from the viewpoint of the validity of purchasing power parity (PPP). Specifically, we analyze real exchange rate behavior under various classifications of exchange rate arrangement through panel unit root tests, and also investigate the adjustment speed of nominal exchange rate and relative prices separately through an error correction framework. Our findings are as follows: First, as a result of the panel unit root tests on real exchange rate behavior, industrial countries under “free float†reveal REER stability even though the test results show weak support for this speculation, while developing countries under “hard peg†definitely represent the REER stability, and have full support from the tests. Second, error correction analysis tells us that in industrial countries under “free float,†the adjustment of nominal exchange rate was faster than that of relative prices, while in developing countries under “hard peg†the adjustment of relative prices is faster that that of the nominal exchange rate. We speculate that industrial countries under free float may render exchange rate movements sensitive to the inflation gap, and that developing countries under “hard peg†may produce nonlinear price adjustments toward the REER long-run equilibrium through an anchor-effect of peg on price stabilization.real (effective) exchange rate, exchange rate arrangement, panel unit root tests, error correction analysis, nonlinear price adjustment

Emigrant’s remittances, Dutch Disease and capital accumulation: The case of Mekong countries

Abstract. This paper examines the sectoral and intertemporal impacts of international emigrant remittances by using a vector auto-regression (VAR) estimation focusing on Cambodia, Lao PDR, Myanmar and Vietnam (CLMV countries). The reason for targeting the CLMV countries is that they have still depended largely on remittance-earnings from their emigrant workers in their economies, and that the macroeconomic impacts of received remittances would be critical for their sustainable growth. The empirical study identified the decline in manufacturing-service ratio (the Dutch Disease effect) as a sectoral effect of remittances, and also the decline in investment-consumption ratio (the deteriorated capital accumulation effect) as their intertemporal effect, judging from the causalities and dynamic responses from remittances to both ratio in the VAR estimation outcomes. The strategic implication is that the CLMV countries should establish a framework to mobilize their remittance-earnings for more productive use.Keywords. Emigrant’s remittances, Dutch Disease, Capital accumulation, Vector auto-regression estimation. JEL. F22, F66, O53

The Effect of Inward Foreign Direct Investment on Economic Growth in Chinese Provinces

Abstract. This article examines the effect of inward foreign direct investment (FDI) on economic growth with a focus on Chinese provinces by conducting the Granger causality and impulse response tests in a vector auto-regression (VAR) estimation. The study contributes to the reviewed literature by examining the FDI effect in such comprehensive ways as demand-side and supply-side models, and by clearing the endogeneity problem of targeted variables under a VAR framework. The main findings of this study were as follows. First, the positive effect of FDI on economic growth in Chinese provinces was confirmed by all the model estimations: statistical, demand-side and supply-side models. Second, from the regional perspectives, the positive effect of FDI on economic growth was found in the eastern region, but not in the non-eastern region. Third, no crowding-out effect of FDI on domestic capital formation was identified both in demand-side and supply side analyses. Keywords. Inward foreign direct investment (FDI), Economic growth, Chinese provinces, Vector auto-regression estimation.JEL. F21, O47, O53

Monetary Policy Rule and its Performance under Inflation Targeting in Thailand

This article reviews the Thailand monetary policy rule and its performance under the adoption of inflation targeting regime since 2000. The study estimates the policy reaction function to see if the inflation targeting has been linked with an inflation-responsive monetary policy rule, and investigates whether the monetary policy rule would actually have its transmission effect on inflation, through tracing the impulse responses of inflation rate to monetary policy shocks. The main findings are as follows. The estimation outcomes of the policy reaction function show that the Thailand monetary policy rule is characterized as an inflation- and exchange-rate- responsive rule with forward-looking manner, which is countercyclical against inflation in the long run, but is accompanied with slow adjustment toward a target policy rate. The impulse response analyses imply that the Thailand monetary policy has only a marginal transmission effect on inflation probably due to the slow adjustment of policy rate

The Development Stage of Bond Market in Mongolia among Asian Countries

This paper aims to address the issue on bond market development by investigating the determinants of bond market development with a focus on Asian economies, and also by identifying the impediment factors to prevent its development in Mongolian economy. This paper contributes to the literature by enriching evidence of the determinants of bond market development with a focus on Asian economies with common characteristics such as their high dependence on banking sectors. In particular, while there have been few studies on an individual economy’s bond market, the strategic contribution is to identify the Mongolia-specific factors to prevent her bond market development among Asian economies. The estimation result shows that the two manageable variables, namely, bureaucracy quality and level of interest rate, are major determinants for both public and private bond market development in Asian economies, and also that these determinants are main factors to prevent the Mongolian bond market from developing