Search

It is a common wisdom in the development literature that economic development brings about financial deepening. But how far does it go? This paper examines Japan's experience over the last four decades, which shows clearly that financial deepening becomes even more pronounced after the economy matures. The paper also indicates salient features of Japan's financial system, i.e. the dominance by a few giant financial institutions. The end result is the tremendous bubble of the late 1980s. Japan has been recuperating from its ill-effects for the last few years. The financial system is subject to inherent instability. The paper explains that various structural features of the Japanese economy are responsible for it.

AbstractThis paper seeks to lay out the strategy of China's developmental approach to transition ‐ how the strategy was developed and why it has worked so well for China. It then goes on to answer the arguments of Sachs and Woo (1994, 1995, 1996) that China's approach to transition has no relevance to the nations of Eastern Europe and the former Soviet Union (EEFSU). The paper begins with a review of China's agricultural reforms. The initial policy changes, as laid out by the Third Plenum in December 1978, were very timid, maintaining the commune and production team structure. But through a process of local experimentation and feedback to the center, the Household Responsibility System eventually became the national standard and free markets in everything but land were established. Neoclassical economists have always insisted that the reform process in the formerly socialist economies must begin with simultaneous stabilization, price and trade liberalization and currency convertibility. But China has moved very slowly in these areas and has done spectacularly well. Sachs and Woo's answer is that China is a special case because of the very small size of its state sector; according to them, the dominance of subsidized state sector jobs in the EEFSU economies means that large shifts in relative prices are needed in order to induce an adequate flow of resources into the new private sector. But this argument ignores the role of demand, both demand for the products of state industry and the derived demand for industrial workers. The state sector in the inner‐core countries of Eastern Europe is much too inefficient to compete at world prices and much too big to simply be shut down. A ‘big bang’ jump to international prices will result in a flood of workers out of the state sector before new jobs are ready for them. Rather China's strategy of a gradual change over to international prices is called for, in order to allow the state sector time to melt away.

AbstractThis paper provides a political‐economy analysis of the Asian financial crisis, with a focus on the economies of Indonesia, Korea, Malaysia and Thailand. It explains why the crisis affected each of these countries differently and why the responses to the crisis differ between governments. The paper argues that banking crises need not necessarily lead to currency crises. In particular, it provides an argument that, despite its banking crisis, Korea should have avoided a currency crisis because its economic fundamentals were fundamentally sound. That it failed to do so was due to the inertia of the previous government and IMF policies, which have the support of the current government because they are consistent with its political imperative. This paper also examines the roles played by the United States, Japan and China, which are the key regional players in the region, in the crisis. It argues that the behaviour of the key regional players was very much dictated by their domestic and international agendas.

AbstractCulture has been considered to be an important factor affecting cross‐border trade and investment. The existing literature addresses this issue mainly by considering the effect of culture on economic relations and suggests behavioural patterns of individuals and institutions when confronted with this environment. This paper considers an effective way to reduce the distance in the cultural gap. It discusses the concept of international sister‐city relationships as an effective instrument to foster closer cultural and economic links between countries. The emphasis is on an integrating approach, based on the multifold relationships between culture and commerce. Exclusive approaches, which follow either a cultural or a commercial agenda, are questioned. The paper is based on a study conducted in 1995–96 among local governments in New Zealand with a sister‐city relationship with Asia. The responses to the surveys resulted in a set of guidelines for effective management and organization of economically motivated sister‐city relationships.

AbstractThis paper develops a conceptual model for the understanding of economic global realignment as a process towards globalization. The paper further develops a set of objectives that addresses the nature and process of the realignment, and to understand the relationship between the regional group formations and the global system of which it is a part. The insights derived from this purpose must be viewed within a framework that allows an objective appraisal of the globalization process. This new world order is being achieved by way of different variations in the regionalism concept. Developments in the Asia Pacific are addressed as important outcomes of the globalization process.

AbstractThis paper concerns the impact of economic reform since 1978 on China's fifty‐five state‐recognized minority nationalities. The main arguments of the paper are: (1) that the nationality areas have been affected greatly by the reform policies, with raised standards of living; (2) that inequalities have widened both as concerns the comparison between the nationality and Han areas, and within the nationality areas themselves; and (3) that the processes of incipient modernization have tended more to integrate the country politically than to divide it.

AbstractGiven the close links between politics and business in Malaysia, the political implications of privatization take on added significance, contributing, in particular, to considerable political patronage during privatization. This paper deals with the problems that emerged following state intervention in the economy which ultimately led to the government's justification for introducing privatization. The paper examines the meaning of privatization in Malaysia, its mode of implementation and its implications on society. The main emphasis here is the question of executive dominance over the state and the impact this can have on the implementation of privatization, in particular, facilitating the practice of political patronage and changing ownership patterns.

AbstractIt is a common wisdom in the development literature that economic development brings about financial deepening. But how far does it go? This paper examines Japan's experience over the last four decades, which shows clearly that financial deepening becomes even more pronounced after the economy matures. The paper also indicates salient features of Japan's financial system, i.e. the dominance by a few giant financial institutions. The end result is the tremendous bubble of the late 1980s. Japan has been recuperating from its ill‐effects for the last few years. The financial system is subject to inherent instability. The paper explains that various structural features of the Japanese economy are responsible for it.

AbstractThe ‘flying geese’ model of regional development is conceived in terms of trade and investment links between the leading and following countries. The paper revisits the model in the light of reverse flow of trade, especially of machinery, to the leading country. This process, which may lead to ‘industrial hollowing’ in the home country, is referred to as the ‘boomerang effect’. The paper casts doubts on Krugman's thesis and concludes that the growth in the Asian economies will act as a prime mover of growth for the US and Japan.

AbstractThe 1990s has seen a resumption of voluntary private capital flows to developing countries, notably to Latin America and to the Asia Pacific. Their sustainabilitywas called into question by the Mexican crisis and exchange rate collapse of 1994–5. This paper suggests that sustainability may, somewhat paradoxically, be related to restrainability,in the sense that, with a fixed or managed exchange rate, short‐term surges in both inflows and outflows must be regulated, taxed or at least sterilized, if they are not to create destabilizing surges in domestic liquidity. After reviewing the composition of recent capital inflows to various Asia Pacific countries, the paper reviews their sterilization dilemmas. It concludes that, whereas the short‐term need to restrain inflows has diminished, long‐term prospects for sustained inflows are good. Relatedly, Asia Pacific countries might be well advised to allow more short‐term volatility of their exchange rates, within the long‐term context of their present managed regimes, in order to discourage surges of capital flows that would otherwise have to be sterilized and possibly regulated.

AbstractThe paper discusses some of the criticisms directed to the use of non‐economic factors in the explanation of East Asia's rapid growth, especially those of the World Bank's publication East Asia Miracle(Oxford, 1993) and then goes on to describe the various social values and other non‐economic forces found in different regions of Asia. It argues that a full understanding of the rapid growth of East Asia, the moderately rapid growth of ASEAN and the slow growth of South Asia must take into account both economic and non‐economic factors. It visualizes the economic factors as comprising the proximate forces in the growth of production, and social values and other non‐economic factors as the distal forces, standing behind the proximate economic factors such as saving, investment, labour input, skills and learning, and governing. These social values are work ethics, thriftiness, esteem and respect for learning and governance. These latter are in turn the product of many forces: geography, climate, history, demography, ethnicity, religion and so on. The paper focuses on the development of various religions and ethical systems of Asia as a major source of social values (Confucianism, Buddhism, Islam, Hinduism, etc.). Finally, policies designed to improve social values are described in various East Asian and South‐east Asian countries. The paper is to be regarded as an initial attempt to study the various non‐economic factors in relation to the economic ones in order to arrive at a comprehensive integrated explanation of differential growth in Asia.

AbstractThroughout South East Asia, with few exceptions, forest fees are low, undervalue tropical timber and forests, are difficult to enforce and collect, and generate inadequate revenues for management of the forests. Low forest fees that under‐value the timber provide little incentive for efficient utilization of the timber or conservation of the forests. The paper examines forest pricing policies for tropical timber and forest concessions in South East Asia. It argues that proper pricing of tropical forests, including royalties on timber and fees on forest concessions can reflect the economic values of the timber and concessions, collect an appropriate share of the economic rent on both timber and concessions, provide economic incentives for more efficient utilization and sustainable management of tropical forests, and provide the revenues to finance forest management and conservation. The paper proposes alternatives and suggests improvements in forest pricing policies to strengthen forest revenue systems and support sustainable management of tropical forests.

This paper examines the productive efficiency and growth performance of China's state and TVE industrial sectors during the reform period. The meta-production function approach is applied using enterprise survey data for the 1986-90 period. It is found that the rapid growth of the TVE sector was mainly driven by total factor productivity (TFP) growth and expansion of capital stock. In the state sector, however, the TFP was decreasing during that period. The TVE sector was still technically less efficient in the mid-1980s but it was catching up with and about to reach the efficiency level of the state sector by the end of the 1980s. It is also found that industry-wide allocative inefficiency between the two sectors was significant for skilled and unskilled labour but less so for capital.

This paper argues, on the basis of studies of agriculture and agricultural policy in Japan in the inter-war period, that the post-war structure of protection and support for Japanese agriculture, which has imposed such high costs on consumers and taxpayers and generated so much trade friction, is not simply the result of the rapid industrial growth of the miracle period and Japan's particular political system. Although influenced by these, it can also be seen as the product of the longer-term process of agricultural adjustment in the first rice-cultivating economy to industrialize. As such, it has a wider significance as other such economies in East Asia and, in due course, beyond reach higher levels of development.

AbstractThis paper explores the nature and characteristics of business cycles for a group of five small open economies that comprise the Association of Southeast Asian Nations (ASEAN). Business cycles are generated as transitory fluctuations around a stochastic trend. The results show that there is qualified evidence of common business cycles among the ASEAN countries. Sources of common variation in cycles are explored by correlating ASEAN country cycles to cycles in the USA and Japan. The results show that US and Japanese cycles are a major cause of cycles in the ASEAN countries. Cointegration tests reveal a long‐run equilibrium relationship between US business and investment cycles and similar cycles in the ASEAN group of countries.

AbstractThe rapid economic growth in China for the past two decades has recently attracted much attention among economists measuring the post‐reform productivity performance in China. What has been generally ignored in this literature, however, is the heterogeneity of growth performance in different regions in China. In particular, Guangdong province has had a growth rate that is far above the national average. In fact, the growth performance in Guangdong has been so spectacular that it is regarded as a new East Asian ‘Miracle’ and Guangdong is referred to as the ‘Fifth Tiger,’ after South Korea, Taiwan, Hong Kong, and Singapore, in some literature. This paper provides an empirical study on the post‐reform productivity performance of Guangdong. Overall, we find that the productivity growth in Guangdong for the past two decades has been high, and has been increasing over time. More interestingly, we find two significant jumps in productivity growth in 1984 and in 1991. We provide an explanation for our results based on the analysis of the changing political and economic ‘institutions’ due to economic reform in China.

AbstractThe Malaysian economy crashed following a sharp drop in the ringgit and the stock market from late 1997, which came in the wake of a regional financial crisis triggered by the baht crisis that started in July 1997. Many have since begun to question the merits of Malaysia as a model of successful development. This paper traces systematically the causes of the late 1980s and early 1990s boom, and the slowdown subsequently. The boom is argued to have been shaped by increased flows of foreign direct investment through a combination of pressures forcing East Asian investment abroad and liberalisation of domestic policies and favourable depreciation in exchange rates and introduction of export‐oriented incentives, which even helped pad crony ventures. The slowdown was triggered by an appreciation of exchange rates, falling tariffs and scrapping of export‐oriented incentives, which encouraged imports and discouraged exports, slowdown in foreign investment inflows, slow technological progress in the face of rising costs, expansion in debt‐driven investment into property and real sectors and unsustainable growth in unproductive crony ventures. The bust consequendy took place following speculation, regional contagion effect, and massive capital flight influenced by herd behaviour and confidence wrecking policy statements.

E. Chen and C. H. Kwan (eds), Asia's Borderless Economy: The Emergence of Sub‐regional Zones,Sydney: Allen and Unwin, 1997. ISBN 18644 84497.Sylvia Ostry, The Post‐Cold War Trading System: Who's on First?,Chicago and London: University of Chicago Press, 1997. Pp. xix + 309. ISBN 0–226–63790–5 (paper), 0–226–63789–1 (cloth). Price unknown.Anek Laothamatas (ed.), Democratization in Southeast Asia and East Asia,Singapore: Institute of Southeast Asian Studies, 1997. Pp. 268. ISBN 9–613–05531–6.

AbstractThis paper uses shift‐share analysis to compare changes in the competitive position of six dynamic Asian economies (DAEs) ‐ Singapore, Thailand, Malaysia, Korea, Taiwan and Hong Kong ‐ exporting to the USA, Japan and the Economic Union (EU) between 1986 and 1993. Two‐digit data are selected for the top five manufactured exports to the USA and the EU, and the top four in the case of Japan. Our findings support the view that the older DAEs have become less competitive over this period in manufactured goods relative to emerging countries such as Malaysia and Thailand.

AbstractThis paper applies a demand model to examine alcohol consumption in rural China. Its objective is to investigate alcohol consumption patterns and their determinants in rural households. The empirical analysis is based on survey data of 1,000 rural households located in twenty counties within five provinces of China. The main issues considered include the effects of household income and demographic characteristics such as age, education, household size, location and occupation, on alcohol consumption.This study is the first of its kind and has important policy implications. In particular this study can shed light on the future demand for grain in China. Alcohol production is one of the major industrial users of grain. Changes in alcohol consumption patterns can directly affect the demand for grain in the future. It is an issue of great strategic significance for both China and the rest of the world.

AbstractThis paper traces the development of science and technology in Singapore from an historical perspective. Such science and technology policies underpin the state's role in its industrial transformation from an entrepôt economy to one with manufacturing and services as the engines of growth.

AbstractProtection of intellectual property on the Asia‐Pacific Rim is weak. Piracy, counterfeiting and other violations of intellectual property in Asian economies with rising technical capabilities were the primary motivation for developed countries’ insistence on protection for intellectual property being included in the Uruguay Round negotiations. One of the central elements of the new World Trade Organization (WTO) is the Agreement on Trade Related Aspects of Intellectual Property (TRIPs) whereby all WTO members have committed to strengthening intellectual property protection. Retaliation in the form of trade measures on goods for intellectual property rights violations is the fundamental enforcement mechanism included in the TRIPs agreement. The exact form retaliation will take was, however, left to further negotiations over a five‐year period. This paper examines the retaliation rules available to the WTO and their likely ability to induce compliance with TRIPs’ commitments. The conclusion is that the threat of retaliation on goods is unlikely to be a sufficient deterrent to prevent intellectual property violations. As a result, intellectual property is likely to remain a contentious issue in Asia‐Pacific economic relations.

AbstractThe Hong Kong‐China relationship has been driven by the complementarity between the two economies, by Hong Kong's entrepôt role and by the relocation of Hong Kong firms into southern China. We argue here that the relationship is entering a new phase. Hong Kong will remain a highly competitive supplier of entrepôt services to China, despite the success of the open‐door policy. However, the regional focus of Hong Kong's investment in China is set to broaden. The sectoral focus of Hong Kong's trade with China is also set to widen. There is, however, some debate in both Hong Kong and China, Guangdong in particular, about the appropriate industry policy settings in this relationship. The argument of this paper is that Hong Kong continues to offer highly competitive intermediary services to China and that the changing competitiveness in Guangdong offers a new set of opportunities to Hong Kong which will actually lead it to a deeper economic relationship with China in terms of its regional focus and sectoral coverage.

AbstractChanges in the economic, demographic and political characteristics of Thailand have had a strong impact on the traditional nature of Thailand's agriculture and livestock industries over the past few decades. This paper outlines the development of the Thai dairy industry and discusses economic factors, including government policies, influencing its development. Land rights have affected its development, e.g. the availability of credit to dairy farmers. In addition, the small size of Thai farms and lack of a ready market in land have resulted in small herd sizes. Furthermore, the extensive use of common property resources has implications for resource management and sustainable agricultural development in Thailand. A number of environmental issues are considered, associated with raising dairy cattle and other livestock in Thailand. The growth of the Thai industry highlights the urgency of cattle disease control, especially the control or eradication of particular diseases. The policy implications of this are discussed. However, in view of the fact that Thailand lacks a competitive economic advantage in dairy production, doubts are raised about die desirability of protecting and developing this industry in Thailand.

AbstractThis paper analyzes economic crimes both theoretically and empirically. Theoretically, an individual utility function is adopted in the beginning. The variables of real police expenditures and economic environment, such as the business cycle, are considered. The directions of influence of these variables on economic crime are dependent upon the risk attitudes of potential criminals. Empirically, time‐series data are adopted from 1966 to 1989 and average economic crime per capita is taken as a dependent variable. The conclusions are as follows: the unemployment rate has a significantly positive effect (a higher unemployment rate results in a higher crime rate), the business cycle has a significantly negative effect (a rising business cycle results in a lower crime rate), police expenditures have an insignificantly negative effect; and real income per capita has an insignificantly positive effect. In general, potential criminals have the tendency of risk‐neutrality or risk‐preference.

AbstractThis paper considers a set of five Asian economies that differ in their degree of outward orientedness, and examines the role of oil price shocks, non‐oil world supply shocks, exports and domestic supply shocks in causing fluctuations in domestic output. Results from a vector autoregressive model indicate that exports and non‐oil world supply shocks are more important for the ‘outward‐oriented’ economies of Singapore, South Korea and Malaysia, when compared with the moderately ‘inward‐oriented’ economy of the Philippines and the strongly ‘inward‐oriented’ economy of India. However, exports and non‐oil world supply shocks each account for no more than a fifth of the variation in output in Singapore, South Korea and Malaysia. There is no long‐term equilibrium relationship (cointegration) between exports and output. This supports the view that exports were not the singledriving force behind the economic growth of these high‐performing countries. A substantial portion of variation in domestic output is explained by domestic supply shocks. Adverse effects of oil price shocks are found in the case of the oil‐importing countries of South Korea and India.

AbstractThe purpose of this paper is to explore, in the context of the emergence of East Asian capitalism, theoretical issues concerning the relationship between the rule of law and capitalism as expressed in the classic work of Max Weber and elaborated by Franz Neumann. More specifically, it will be argued that the optimistic Weberian vision of the growth of liberal capitalism and market rationality is clouded mainly because it is based on a distinctive model of liberal capitalism, especially one requiring an assertive bourgeoisie demanding legal restraint on the exercise of state power. State‐driven capitalism in East Asia, which has produced its own brand of legalism, is better explained in terms of Franz Neumann's analysis of the differing legal forms under various forms of capitalism, and may provide a more useful framework than the Weberian model in understanding the nature of the relationship between law and capitalism. While Weber's analysis of the emergence of rational law arises out of an historical methodology it is not able to go beyond a conception of modern law as the summit of a rational process of modernization. In contrast, Neumann provides a useful framework for the development of historical sociology of legal institutions that is able to relate forms of capitalism, political structures and legal institutions.

AbstractThe Ninth Five‐Year Plan defines China's approach and priorities to economic reform for the period 1996–2000. The Plan recognizes that the agriculture sector is the weak link in China's drive for rapid economic development. It is the thesis of this paper that the 9th Plan focuses too much on producing more of China's staple foods and fails to lay the foundation for an agriculture that can meet the rapidly changing taste patterns of that subset of the population that is becoming more urban and is experiencing a rapid growth in income. It is argued that China needs to develop a mature food and agriculture system which directs resources to creating an efficient agricultural inputs and services subsector as well as a modern post‐harvest subsector. This will involve institutional development with extensive investment in such activities as the timely and efficient delivery of farm inputs as well as the storage, transport, processing and marketing of farm output. External forces will have a major impact on shaping the continued development of China's agriculture sector as it struggles to compete internationally in the face of significant water and land constraints. Where these external pressures promote reforms that include a greater reliance on market forces, China still has some distance to travel before resources will be allocated on the basis of relative prices that are formed in open, competitive markets.

AbstractIt has taken until the Uruguay Round for agriculture to be brought under the discipline of the GATT rules‐based trading system. This paper first examines the extent to which the Round's Agreement on Agriculture provides the necessary discipline on farm policies, what reform implementation progress has been made to date, and what problems remain for the next Round of negotiations. It notes that the new rules for agriculture are far from ideal, and the extent of reform commitment is quite minor for the rest of this decade, but at least a start has been made. An important conclusion for net food‐importing developing countries is that they need not fear a GATT‐induced increase in the price of their food imports; on the contrary, any food price rise that might occur because of the Round's implementation will be so small as to be indistinguishable amidst the many other economic forces at work in international commodity and foreign exchange markets.

AbstractRegional, in the sense of subnational, development is all too frequently ignored in assessing the socio‐economic performance of countries. Yet in an era when nation‐states are under challenge as never before, it is important to include the regional dimension in any such assessment. This paper addresses the issue with reference to four Southeast Asian economies. These countries provide an excellent laboratory for an examination of regional development performance and policy issues, given their ecological and economic diversity, and the range of policy approaches employed.

AbstractPakistan faces critical economic development problems, with the quantity and quality of livelihoods being a central issue. Much policy emphasis was put on liberalization in the first half of the 1990s, and a central plank in liberalization was privatization. The paper outlines the implications of privatization for the quantity and quality of employment, real output, fiscal and social policy. There are reasons for concern about the likely impacts of privatization in all these dimensions. The conclusion points to the need for systematic monitoring and evaluation of the privatization process.

AbstractThis paper draws on the experience of China to show that improved enterprise performance can be achieved without privatization. Export expansion is used as an indicator of increased economic efficiency. China has reformed its traditional state‐owned enterprises by the use of management contract systems, expanding enterprise autonomy and increasing retained profits. Township and village enterprises, which are public enterprises under the ownership and control of local authorities, have been crucial to China's export expansion, and are particularly suited to the environment of a partially reformed transitional economy. Foreign investors have been important in the export drive too, but usually in joint ventures with domestic firms, whose reform they have had to undertake themselves.

AbstractThe papers in this Policy Symposium were originally presented at a Workshop on Privatization and Public Enterprise Reform in Developing Countries, organized by the Institute for Development Policy and Management (IDPM), University of Manchester, and the Development and Project Planning Centre (DPPC), University of Bradford, in June 1996. The Workshop was a component of an ongoing research project on privatization in the Asia region, directed by Colin Kirkpatrick and Paul Cook, and funded by the British Academy. Financial support from the British Academy, IDPM and DPPC for the Workshop, is gratefully acknowledged.

AbstractThe familiar ‘small‐country’ assumption is tested empirically in this paper, focusing upon the long‐run international demand for Thailand's rice exports and drawing upon recent developments in the statistical analysis of economic time series. A relatively robust long‐run price elasticity of export demand is obtained, at just under 2. The literature on the export demand for manufactured goods has shown the central importance of the ‘normalization’ used during estimation. Our results suggest that this issue may not be as important in the case of primary commodity exports, at least not where the exporting country possesses a degree of monopoly power.

AbstractThis paper examines the productive efficiency and growth performance of China's state and TVE industrial sectors during the reform period. The meta‐production function approach is applied using enterprise survey data for the 1986–90 period. It is found that the rapid growth of the TVE sector was mainly driven by total factor productivity (TFP) growth and expansion of capital stock. In the state sector, however, the TFP was decreasing during that period. The TVE sector was still technically less efficient in the mid‐1980s but it was catching up with and about to reach the efficiency level of the state sector by the end of the 1980s. It is also found that industry‐wide allocative inefficiency between the two sectors was significant for skilled and unskilled labour but less so for capital.

AbstractThis paper argues, on the basis of studies of agriculture and agricultural policy in Japan in the inter‐war period, that the post‐war structure of protection and support for Japanese agriculture, which has imposed such high costs on consumers and taxpayers and generated so much trade friction, is not simply the result of the rapid industrial growth of the miracle period and Japan's particular political system. Although influenced by these, it can also be seen as the product of the longer‐term process of agricultural adjustment in the first rice‐cultivating economy to industrialize. As such, it has a wider significance as other such economies in East Asia and, in due course, beyond reach higher levels of development.

AbstractJapan's dominant economic power in Southeast Asia has played a vital role in the economic integration of the region. The paper analyses some of the more important aspects of Japanese economic power in Southeast Asia and its geopolitical implications. There is a close relationship between Japan's new economic power and its increasing involvement in the domestic and regional politics of Southeast Asia.

AbstractThis paper overviews work on the definition, measurement and implications of international financial integration. It first reviews the international parity relationships and three measures of the degree of international financial integration: namely, the savings‐investment correlation measure, the equalization of rates of return measure and the international capital market completeness measure. It points to the benefits of free international mobility of financial assets, including the facilitation of obtaining the gains from commodity and services trade, reducing risk, enabling the financing of high return investments and smoothing international consumption. It also points out the side effects including the relative effectiveness of alternative stabilization policies and their effects on savings and income distribution through their effects on the tax system. It concludes that free capital mobility is not a primal source of economic instability and policies aimed at restricting the free international mobility of financial capital may be difficult to implement and carry the risk of inducing firms to manage their international risks by reducing their exposures caused by international trade.

AbstractMarket forces, structural factors, financial liberalization and concerted policy measures coalesced to globalize the financial markets. Initially Asia Pacific economies did not receive much attention from the international capital market but by 1990s the scenario underwent a considerable transformation. Rapid growth, macroeconomic stability and strong fundamentals made the region exceedingly attractive to international investors. Consequently, the region was highly successful in attracting foreign direct investment and securitized capital, which includes both equity and international bond investment.Volatility of securitized capital has always been a cause of worry. It is influenced by both the global factors and country‐economy‐related factors. Capital inflows have a great deal of impact on the demand for credit and money supply in the recipient economy. The Asia Pacific economies were highly successful in sterilizing the capital inflows.Volatility in external financial inflows can be notoriously destabilizing. Most large importers of securitized capital resort to moderate currency appreciation. Sterilized intervention was found to be the most preferred strategy in the Asia Pacific region. But this strategy cannot be followed too aggressively without tightening the fiscal policy. The paper also focuses on macroeconomic stabilization measures as well as individually on seven regional economies.

AbstractThe early 1990s witnessed the reversal of dominance in the world computer market. This article examines the process by which the US overtook Japan. It identifies five interrelated factors that contributed to the re‐emergence of the US as the leading supplier of semiconductors. These are: structural changes in the US computer industry, non‐intrusive, but pro‐industry, government interventions, superior performance of the US firms in strategic alliances and R & D, interplay of software and hardware, and favourable economic conditions in the US. In contrast to a regimented and memory based education system of Japan, the more open education system which encourages critical thinking have helped the US to stay ahead of the competition at the leading edge of technology. Likewise less centralized government intervention induced spontaneous inter‐firm cooperation that led to strategic alliances crucial for their success. The paper maintains that the US lead in the world computer market will remain into the twenty‐first century.

AbstractThis paper tests the structure‐conduct‐performance paradigm in eighteen Asian and Pacific Basin countries. The results suggest that concentration in the banking markets in these countries lead to monopoly profits being earned and is a signal of collusive behaviour among the leading banks. Competitive imperfections allow banks to set prices that are less favourable to consumers thereby decreasing total consumer and producer surplus. This has important policy implications for merger activity. A further increase in concentration in the banking market in these countries will decrease the level of competition in the market. Regulatory actions, such as anti‐trust laws, are justified on efficiency grounds as well as for raising economic welfare.

AbstractIn the mid‐1930s, Professor Kaname Akamatsu developed a theory on economic development in an international context using the experience of Japan during the preceding decades. The theory, although well known among Japanese economists, was virtually unknown to their Western counterparts until the 1960s, when the first articles by Akamatsu were published in English, followed by work by other Japanese economists.The ‘flying geese’ model originally depicted the development over time of a single industry, but can easily be reinterpreted as a model for structural change and/or the growth and development of a group of countries. The issue of foreign direct investment was not discussed much in the original formulations of the theory, but can easily be linked to it, as the work of Kiyoshi Kojima and others has demonstrated.The purpose of the present paper is to give an interpretation of the ‘flying geese’ model of development and to assess the usefulness of the model for understanding economic development and industrial policy in East Asia. Use of the model as a framework for analysing regional economic interdependence in general is also discussed

AbstractThis paper examines newly emerging economic patterns in East Asia. Trade, investment and regional co‐operation all encouraged the rapid growth of the region. The role of US‐Japan economic relations and their interdependence are discussed. An upsurge of direct investment has changed the nature of international relations, particularly the interaction among people through corporate activities over and beyond national borders. The US‐Japan competition in Asia is considered not as rivalry but as a contributing factor to the economic growth of East Asia. The waves of growth are dynamically shifting its centre from Asian NIEs to ASEAN, from ASEAN to China and Vietnam, and to the rest of the region. Transfer of managerial resources is discussed. Some sub‐regional economic co‐operation and localized economic zones are presented in the context of this dynamic shift of growth centres.

AbstractThis paper studies the possibility of forming a yen bloc in Asia from four complementary approaches — (1) internationalization of the yen, (2) optimal peg for the Asian countries, (3) optimum currency areas, and (4) tripolar monetary system — which offer, respectively, Japanese, Asian, regional and global perspectives of the issue. The focus is on the implications of the formation of a yen bloc for macroeconomic stability in participating countries (including Japan itself) and the global economy. The Asian NIEs, which compete with Japan in international markets, are better candidates than the ASEAN countries and China to join a yen bloc.