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We investigate how trade patterns – institutionally intensive exports (IIX) – affect institutional quality in East Asia compared to the rest of the world, and whether the effect changed due to the Asian financial crisis. To examine this, we use panel data of 117 countries for the period 1988–2007. Our fixed effect model estimation reveals that the effect of IIX on institutional quality is negative and significant for East Asia, while the effect is insignificant for the rest of the world. The negative effect in East Asia is more pronounced for the five East Asian countries that were strongly affected by the crisis – South Korea, Indonesia, Malaysia, the Philippines and Thailand – than for other East Asian countries. Furthermore, our results reveal that the negative effect for East Asia does not change significantly after the crisis, both in the short and long term, and that improvement in institutional quality after the crisis is not different from that of the rest of the world. This suggests that the crisis had no significant impact on East Asia's institutional quality or on the effects of IIX on institutional quality. [ABSTRACT FROM AUTHOR]

Abstract: This paper applies Monte Carlo simulations to evaluate the size and power properties in the presence of a structural break, for the standard Augmented Dickey‐Fuller (ADF) test versus nonlinear exponential smooth transition autoregressive unit root tests. The break causes the tests to be undersized, and the statistical power considerably decreases. Moreover, the effect is intensified in small samples and very much increased for more persistent nonlinear series. As a remedy, we modify the standard ADF and exponential smooth transition autoregressive unit root tests in order to adjust for a structural break. This improves both the power and the size considerably, even though the empirical size still is lower than the nominal one. More persistent series are more affected by structural breaks, and the new tests are most powerful under the existence of a rather persistent nonlinear data generating process (which is an empirically relevant and common type of data generating process). The proposed tests are applied to investigate mean reversion in the real effective exchange rates of 5 East and Southeast Asian countries, taking into account the structural change in exchange rate regime brought about by the 1997 Asian financial crisis. The empirical findings corroborate our simulation results; the modified more powerful tests are able to reject the unit root in all 5 countries, whereas the tests that do not consider the structural break could only reject in one of these cases. [ABSTRACT FROM AUTHOR]

This paper provides a comparative analysis of stock market dynamics of the 1987 and 2008 financial crises and discusses the extent to which risk management measures based on entropy can be successful in predicting aggregate market expectations. We find that the Tsallis entropy is more appropriate for the short and sudden market crash of 1987, while the approximate entropy is the dominant predictor of the prolonged, fundamental crisis of 2008. We conclude by suggesting the use of entropy as a market sentiment indicator in technical analysis. [ABSTRACT FROM AUTHOR]

Since advent of current float in 1973, the literature on the impact of exchange rate volatility on trade flows has grown so rapidly that most countries have their own literature and Singapore as our country of concern is no exception. Previous studies have investigated the response of aggregate trade flows of Singapore with the rest of the world to exchange rate volatility and have found mostly insignificant link. In this paper we argue that they all suffer from aggregation bias and concentrate on trade flows between Singapore and her major partner, Malaysia. After disaggregating their trade flows by commodity we find that exchange rate volatility has significant short-run effects in 70 out of 156 exporting industries and in 73 out of 155 importing industries. However, short-run effects last into the long run only in 46 exporting and 36 importing industries. We also find that less than 50% of Singapore's industries were affected by the Asian Financial Crisis in 1997. [ABSTRACT FROM AUTHOR]

The stability of portfolio investment in stock market crashes with Markowitz portfolio is investigated by the method of theoretical and empirical simulation. From numerical simulation of the mean escape time (MET), we conclude that: (i) The increasing number of stocks in Markowitz portfolio induces a maximum in the curve of MET versus the initial position; (ii) A critical value of in the behavior of MET versus the long-run variance or amplitude of volatility fluctuations maximumlly enhances the stability of portfolio investment. When takes value below the critical value, the increasing enhances the stability of portfolio investment, but restrains it when takes value above the critical value. In addition, a good agreement of both the MET and probability density functions of returns is found between real data and theoretical results. [ABSTRACT FROM AUTHOR]

Most studies of financial crises focus on the impact on states, and the states’ responses. Few, if any, have focused on how these crises affect communities within the state which do not have control of the state apparatus. These groups, left out of decision-making processes and calculations by the state, suffer the most. In pre-war British Malaya and Malaysia, these groups were the Chinese overseas, Indians and some Malay minorities. A study of the impacts of the Great Depression and the Asian Financial Crisis on the Chinese overseas may help to illustrate how such groups, left on their own, coped with such crises. A study of the Chinese overseas is not insignificant because the community wielded considerable economic influence in the 1930s and in 1997. This paper argues that despite the obvious differences in circumstances, there are common threads to the narratives of both crises. These include the roles played by exchange rates and banking institutions which the Malayan Chinese helped to establish in the two countries. [ABSTRACT FROM PUBLISHER]

Motivated by a concern that Indonesia is on the path to deindustrialisation, this article uses data from 1991 to 2009 to examine whether there were differences in the characteristics of entrants to the Indonesian manufacturing sector before and after the 1997–98 Asian financial crisis. It finds that entrants after the crisis were larger or less dependent on credit than their predecessors, suggesting that they were more resilient to economic shocks. Yet entrants after the crisis exported relatively less than their predecessors. Meanwhile, productivity levels were the same before and after the crisis, indicating that entrants were able to match the productivity level of incumbents. Contrary to the concerns about deindustrialisation, these characteristics may simply reflect a dynamic that resulted in better or more resilient firms entering the industry after the crisis. [ABSTRACT FROM AUTHOR]

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The 1997 Asian crisis created a political space for neo-liberal reformers within the Korean state to advance a set of policies that had previously been frustrated. This agenda is widely seen to have stalled following an initial burst of neo-liberal reform in the post-crisis period. Several scholars have argued that a partial reconstruction of an economy dominated by a closed nexus between the state and leading domestic firms is taking place in contemporary Korea. Compared to the 1997 crisis the macroeconomic impact of the contemporary crisis on Korea has been limited. However, Korea initiated the largest fiscal stimulus (in relation to GDP) in the Organisation for Economic Co-operation and Development. In terms of the policy environment the impact of the contemporary crisis has been considerable. This paper argues that key aspects of the Korean state's response to the crisis represent a selective limited retreat from neo-liberalism, the significance of which should not be overstated. [ABSTRACT FROM AUTHOR]

We investigate the impact of the IMF-supported structural reform program in the 1997 Asian crisis on stock market efficiency using the before-after, with-without and event study approaches by applying a time-varying parameter model to eight Asian stock markets. All the supported countries, including Indonesia and Korea, but not Thailand, experienced significantly improved market efficiency after the implementation of the program, implying a positive effect of the program according to the before-after approach. Among the nonsupported countries, China, Taiwan and Malaysia did not improve efficiency (however, Hong Kong and Singapore did) after the start of the crisis, providing some evidence of a positive effect according to the with-without approach. The Thailand, Indonesia and Korean markets showed positive abnormal returns on the days or days following policy announcements in this IMF-supported program, indicating positive effects of the policy according to the event study approach. These findings suggest that the IMF program was successful during the 1997 Asian financial crisis and that it was helpful in resolving the recent global financial crisis. [ABSTRACT FROM AUTHOR]

This paper examines whether and how differences in investors' information environments (measured by a country's information disclosure, accounting standards, and financial transparency) are related to cross country-differences in the market risk premium volatility. We use the vector-autoregressive and implied cost of capital methods to extract time variation in risk premiums for 41 developed and emerging markets worldwide. Consistent with theoretical predictions, countries with better information environments tend to experience a lower risk premium volatility, even after controlling for various country variables that are potentially associated with variation in risk premiums. Our analysis of two exogenous events, specifically the 1997 Asian financial crisis and 2008 global financial crisis, further corroborates our key finding that information environments play an important role in explaining market risk premium variability. [ABSTRACT FROM AUTHOR]

Business group affiliation seems to make a firm more opaque. The benefits of group affiliation (internal market transactions) and the negative aspects of group affiliation (agency problems of group control) both may make group firms more opaque than non-group firms. Using the opacity index developed by Anderson, Duru, and Reeb (2009), this paper reports that Korean group firms are more transparent than non-group firms after the Asian financial crisis (1997-1998) and this leads to better performance of group firms. The improved transparency results from disappeared internal market benefits and diminished agency problems. These results are robust after controlling for the size of internal markets of groups, industry diversification, the existence of group inside financial institutions, and endogeneity. [ABSTRACT FROM AUTHOR]