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Both financial market deregulation and global external imbalance feature prominently among the potential causes of the 2008 global financial crisis, but they have been largely examined separately. In this paper, we take a different angle and investigate the relationship between financial market regulation and current account imbalances, an area for which limited empirical evidence exists. Using a large data set that includes 66 developed and emerging and other developing countries and a fixed effects identification strategy. We find robust and consistent evidence that countries employing significant repressive financial policies are more likely to run current account surpluses. Specifically, interest rate controls, state ownership in the banking sector and capital account controls are the main policies contributing to external imbalances. Analysis of possible mechanisms confirm that financial repression mainly affects external imbalances through its effect on industrial structure. Furthermore, financial repression has a larger effect on the current account in East Asia than the rest of the world. [ABSTRACT FROM AUTHOR]

Foreign direct investment (FDI) can affect the levelanddispersion of wages, but there is a lack of empirical work in this area. This paper tests for the effects of FDI on wages and wage inequality in five East Asian countries. Wage inequality has been low and decreasing in some, but not all, East Asian countries. Using ILO data for wages and employment by occupation, we do not find strong evidence that FDI reduced wage inequality in five East Asian countries over the period 1985–98. Indeed, controlling for domestic influences (wage setting, supply of skills) we find that FDI has raised wage inequality in Thailand. Because we also find that FDI raises the wages for both skilled and low-skilled workers, our findings should help to move the debate from impact (does FDI contribute to growth and development?) to appropriate policies to utilize FDI (how can we make FDI work for all?). We suggest that the education system in Thailand has not been sufficiently oriented to maximize the benefits from FDI. Countries wanting to develop on the basis of FDI should invest sufficient resources in good quality and appropriate human resources, or otherwise face the possibility that growth coincides with rising wage inequality. [ABSTRACT FROM AUTHOR]

For the last 15 years, computers and electronic goods have been the leading export categories from East Asia to the rest of the world. They are produced within regional production and distribution networks. Japan, South Korea and Taipei, China, construct technology-intensive parts and components and ship them to China and ASEAN for processing by lower-skilled workers and reexport. This paper presents evidence that exchange rate appreciations in countries supplying parts and components to East Asian assembly economies would curtail these sophisticated exports, while exchange rate appreciations in assembly economies would not. The evidence also indicates that decreases in income in importing countries would significantly reduce computer and electronic goods exports. [ABSTRACT FROM PUBLISHER]

All economies experience peaks and troughs in their business cycles. This paper examines eight East Asian economies, employing a Bayesian dynamic factor model that allows the decomposition of aggregate shocks into country-specific, regional and world common business cycles. It therefore allows the identification of causes for major events experienced by these countries. Empirical evidences show that country-specific factors are the most important in determining the major events for all the countries examined here, implying the need for each country to rely more heavily on its own independent counter-cyclical policies. Although the regional factor plays a less important role than the country-specific factor, it accounts for a sizeable share in the output fluctuation of the region. The regional factor is most prevalent for Singapore, Korea, Malaysia and Thailand, indicating that a regional coordinated policy is rather more effective for these economies to respond to disturbances. The world factor explains only around 7% of the output variation in East Asia, which might explain why the East Asian economies are relatively insulated from the recent global financial crisis. [ABSTRACT FROM AUTHOR]

This paper measures the knowledge-based development of nine countries in the two categories of developed and emerging economies. The developed economies selected include the three bench-marking developed countries from three different regions; they are the United States from the North American region, Finland from Europe and Japan, Korea and Singapore from the Asia region. The emerging economies, on the other hand, include China, Malaysia, the Philippines and Thailand. The performances of these countries are evaluated by two means: the radar charts and Data Envelopment Analysis (DEA). The first analysis shows that developed countries have accumulated more knowledge stock. They have also shaped a better resource environment relative to emerging countries. On the other hand, the DEA scores indicate that four of the small countries, Finland, Malaysia, Singapore and South Korea, are relatively more efficient in generating further K-outputs when compared with the large economic giants such the US and Japan, and also other less-developed peers in term of GNI per capita. [ABSTRACT FROM AUTHOR]

This paper applies the generalized purchasing power parity (G-PPP) theory to assess the potential for an optimum currency area (OCA) for the ASEAN5 plus the big three (ASEAN5+Big3) during a period containing significant structural breaks, using the US, Japan and China as base countries. The relevance of considering breaks is demonstrated by utilizing the Johansen et al. (2000) procedure that allows for up to two predetermined breaks. The results provide support for long-run G-PPP and suggest that the larger group ASEAN5+Big3 could form an OCA in one step. Conversely, for smaller groups, such as the Big3, an OCA is not supported. However, adding one or more countries to the Big3 supports an OCA. The impact of the Asian crisis seems to be limited to when the US is the base country and the results suggest a change in the G-PPP relationship between the pre- and postcrisis periods. Moreover, stability tests suggest that G-PPP has been stable for the period analyzed. [ABSTRACT FROM AUTHOR]

This paper re-assesses the prospects for greater exchange rate cooperation in East Asia in the wake of the Asian financial crisis of 1997–8. The crisis highlighted the inability of unilateral exchange rate mechanisms to deal adequately with the inflow of foreign capital and the absence of a common defensive mechanism to deal with speculative movements in exchange rates. Since 1997 there have been a number of initiatives to enhance monetary cooperation in the region including options for a common exchange rate system. We find that whilst a common monetary and exchange rate policy in East Asia is unlikely in the foreseeable future, until the net economic benefits of giving up unilateral exchange rate regimes are more apparent, a good case can be made for continuing to talk about such arrangements. In the early stages the prerequisites for exchange rate cooperation are not as demanding as for full monetary union, provided sufficient flexibility is built-in. Of the available options a solution along the lines of the former European Exchange Rate Mechanism might be politically the most appealing if the arrangements are flexible enough to leave countries initially with sufficient independence in macroeconomic policy, and it can build on European experience. [ABSTRACT FROM AUTHOR]

In the wake of the economic and political crises that gripped parts of East Asia from 1997 onwards, much attention was given to the possible reform of the region's distinctive political practices and economic structures. Especially prominent in this debate were key international financial institutions (IFIs) like the International Monetary Fund, the World Bank and - more subtly - the US Treasury Department. Yet many observers claimed that the IFIs themselves were in need of reform, as was the international financial architecture they helped create and manage. Significantly, however, no serious attempt has been made to reform the international financial system despite concern about its impact on the region generally and during the crisis in particular. This paper reviews the central issues in the debate over financial sector reforms, and argues that while further liberalization continues to be urged upon East Asia, substantial reform of the IFIs or the international financial sector is unlikely given existent patterns of political and economic interests, despite continuing doubts about their benefits. [ABSTRACT FROM AUTHOR]

This paper classifies East Asian countries on an amenity-productivity map based on environmental quality and income differentials. This classification is useful because it provides information about the relative attractiveness to consumers and producers of the total bundle of environmental and other attributes indigenous to each region. It also assists policymakers to formulate the most suitable regional and environmental policies. Our findings suggest that the notion of sustainable development is best suited for low productivity countries such as Indonesia, the Philippines, Thailand, and Malaysia. [ABSTRACT FROM AUTHOR]

There has been a striking recent upsurge of oppositional political activity in East Asia, including labour and popular responses to the Asian economic crisis. This is mirrored in the policy recommendations and campaigns advanced by Asian and European NGOs that provide an alternative vision for sustainable economic and social development. The paper explores the significance of politics 'from below' for current efforts to institutionalize interregional cooperation through the Asia-Europe Meeting (ASEM). It asks whether it is justifiable to identify this development as comprising emergent realities of 'regional civil society' and 'transnational democracy'. The first part outlines the theoretical debate between neoliberal, liberal-pluralist and critical-structural approaches to civil society's attempts to respond to processes of 'globalization'. The second part examines the role of both elite social movements and developmental NGOs as actors seeking to address the current ASEM agenda. It identifies key tensions in the responses of civil society actors: between elite inclusion, accommodation and outright opposition. This is followed, in the third part, by a critique of current NGO response to ASEM focusing on: (i) the practical dilemmas of their engagement with the emerging multilateralist agenda; (ii) the privileging of a liberal-pluralist conception of civil society that dominates NGOs' 'rethinking' of their strategic goals; and (iii) a misreading of the globalization discourse that serves to obscure the ways in which capitalism is actually being reconfigured in our era. The main conclusion is that movements of political opposition have acted to increase public participation in and criticism of interregional policy discussions. However, it argues that capitalist social relations remain a massive obstacle to the kinds of demands for social justice made by associations of civil society. [ABSTRACT FROM AUTHOR]

The article presents an introduction to this special issue of the "Journal of the Asia Pacific Economy" that focuses on economic development and industrial upgrading in East Asia and China.

The common success as well as the post-1997 crisis of East Asian countries has led to a widespread tendency to view their economic systems as a homogeneous monolith. In reality, there are significant structural differences among the region's economies, although they do share many strengths and weaknesses. In particular, Northeast Asia and Southeast Asia appear to have followed significantly divergent paths toward development and growth. The main goal of this paper is to elaborate upon those differences to contribute toward a more complete and balanced understanding of East Asian economies. [ABSTRACT FROM AUTHOR]

Hedge funds and private equity funds are two of the most discussed features of contemporary global finance. This article explores the extent to which these new financial forms have arisen outside of the US and a small number of other advanced financial markets. There has been greater experimentation with global finance in emerging markets than is often acknowledged and domestic resistance to Anglo-Saxon business processes has not derailed the spread of new finance across the Asian region. The rise of these new financial industries, with the notable exception of Japan, would have been impossible without the commitment of one key domestic actor. Asian institutional investors, especially pension funds, have served as crucial financiers to hedge funds and private equity groups. The article concludes with caution concerning whether these new financial actors are set to capture significant global market share. [ABSTRACT FROM PUBLISHER]

East Asia has experienced fast economic growth along with large inflows of foreign direct investment (FDI) and accumulated human capital since the 1960s. Economic literature suggests a link between FDI and human capital development via technology transfer. This study employs a panel of sample data from 16 East Asian countries from 1985 to 2010 to examine the effect of inward FDI on human capital accumulation. The results show that an increase in foreign presence is associated with an increase in secondary schooling, yet has a negative impact on tertiary schooling. FDI from OECD countries presents positive effects on both secondary and tertiary schooling in East Asian countries. The findings are robust to different measures of educational attainment and different specifications. [ABSTRACT FROM PUBLISHER]

Since the early 1980s, developing countries have generally welcomed FDI, recognizing its manifold benefits, such as provision of capital, transfer of technology, etc. An extensive literature has evolved on FDI that identifies a number of variables, such as market size, trade openness, etc, as its key determinants. Domestic investment climate as a determinant of FDI has been excluded from the literature as reliable data on investment climate are generally unavailable. This study seeks to fill that void by using the economic freedom index, published since 1995 by The Heritage Foundation/Wall Street Journal, as a proxy for domestic investment climate for a sample of seven East Asian countries over the 1995-2000 period. Employing panel regression methodologies, this study finds that economic freedom is a significant and robust determinant of FDI. These results further our knowledge of the FDI dynamics in East Asia, which should be helpful in devising strategies to attract more FDI into that region. [ABSTRACT FROM AUTHOR]

This study assesses financial integration and the degree of international capital mobility in the East Asian region by analyzing the dynamics of national saving-investment relationships. Following the work of Pelgrin & Schich (2004), we interpret the close relationship between national saving and investment in the long run reflecting a solvency constraint and focus on the short term saving investment analysis relationship to assess the degree of capital mobility. Applying the panel error – correction technique proposed by Pesaran et al. (1999), our empirical results suggest that there exists a long-run relationship between saving and investment and that the short-run is driven by the extent of the gap between current and long-run equilibrium values. The low estimated values of the short-run coefficient of the changes in the saving rate signal some degree of capital mobility. [ABSTRACT FROM AUTHOR]

Intra-regional trade and investment in East Asia has increased during the last few decades. These flows have accelerated again since the beginning of the 1990s. The recent trade integration in the East Asian region can be explained mainly by the more active and connecting roles of newly industrializing economies (NIEs) rather than by Japan and concentrated FDI flows within the region. Regional financial market integration also helped facilitate this process of trade and investment integration within the region. The concentrated FDI flows have led to the internationalization of production networks, of which ethnic Chinese networks have been particularly significant. East Asian economies are able to seek further regional integration based on these production networks and on newly formed local and subregional integration schemes. [ABSTRACT FROM AUTHOR]