Juthathip Jongwanich

Determinants of Export Performance in East and Southeast Asia

This paper examines the determinants of exports in eight East and Southeast Asian economies, with an emphasis on the increasing importance of parts and components in total exports. To see whether exports in parts and components are ‘special’ and to allow comparisons, export equations are estimated for three different export categories: total merchandise exports, manufacturing exports and exports of machinery and transport equipment (SITC 7). The analysis is based on data for 1993–2008, a period over which parts and components trade burgeoned. The estimations indicate that the growing importance in the export composition of parts and components within vertically integrated cross-border production processes has tended to weaken the nexus of real exchange rate and export performance. World demand and supply-side factors, including foreign direct investment, tend to become more crucial in determining export performance.

Capital Flows and Real Exchange Rates in Emerging Asian Countries

This paper examines the nexus between capital flows and real exchange rate (RER) in emerging Asian countries using a dynamic panel-data model for 2000-2009. In contrast to previous studies, capital flows here are separated into foreign direct investment (FDI), portfolio investment, and other investment (bank loans) flows. Inflows and outflows are also treated separately in the model. The estimation results show that compositions of capital flows matter in determining impacts of the flows on the RER. Portfolio investment and other investment (including bank loans) bring in a faster RER appreciation than FDI. However, the magnitudes of appreciation among capital flows are close to each other. The increasing importance of merger and acquisition activities in FDI makes the flows behave closer to other forms of capital flows, especially portfolio investment. The estimation results also show that capital outflows bring about a greater degree of exchange rate adjustment than capital inflows. All in all, the results imply that the swift rebound of capital flows in the region could result in excessive appreciation of the (real) currencies, especially when capital flows are in a form of portfolio investment and bank loans.

The determinants of household and private savings in Thailand

A broad set of possible determinants of household and private savings behaviour is examined through an in-depth case study of Thailand during the period 1960 to 2004. Results suggest that an increase in economic growth, inflation and terms of trade all have a significant positive impact on household and private saving rates. In contrast, the availability of bank credit tends to reduce household and private saving rates. While an increase in both old and young dependency has a negative impact on household and private saving rates, the magnitude of the impact on the former is far greater than that on the latter. Furthermore, public saving seems to crowd out household and private saving, but less than proportionately. This reflects a possible role of fiscal policy in increasing national savings in the economy. Over and above these variables, corporate saving is another important determinant of household saving. An increase in the former brings about a significant reduction in the latter.

Inflation in Developing Asia: Pass-Through from Global Food and Oil Price Shocks

The world economy experienced a sharp spike in food and oil prices during 2007 and 2008. In light of developing Asias dependence on imported oil and food, we can expect higher global food and oil prices to result in higher domestic consumer prices in the region. However, the actual impact of the global commodity shocks on consumer price inflation in developing Asia depends on a number of other factors, including government policy measures. The objective of this paper is to examine empirically the extent of the pass-through of global food and oil prices to domestic consumer prices in nine countries in the region. The main empirical result is that the magnitude of the pass-through has been limited. Government policy measures, for example, subsidies and price controls, played a role in reducing or delaying the pass-through of oil and food price increases to domestic prices.

Equilibrium Real Exchange Rate, Misalignment, and Export Performance in Developing Asia

This paper examines the equilibrium real exchange rate and real exchange rate misalignments in developing Asian countries during the period 1995–2008. In addition, the relationship between real exchange rate misalignment and export performance is investigated. In the lead-up to the 1997–1998 financial crisis, real exchange rate exhibited persistent overvaluation in the crisis-affected countries. After the crisis, real exchange rate undervaluation was evident in many Asian countries such as People’s Republic of China (PRC), Malaysia, and Thailand. This study also shows that real exchange rate misalignment could have a negative impact on export performance in developing Asia. With its implications on economic activity, monitoring real exchange rate equilibrium and misalignment is a useful tool for governments/central banks to ensure balance in the economy.

How Effective are Capital Controls in Asia

This study examines the effects of capital account restrictions on capital flows in nine Asian economies over the period 1995–2005 using panel regressions with fixed effects. The results show that capital controls significantly affect capital flows when such flows are disaggregated by asset type and direction of flow. Tests for the presence of possible asymmetric effects, substitution effects, and endogeneity of capital controls are conducted.

Cross-Border Mergers and Acquisitions and Financial Development:Evidence from Emerging Asia

The paper examines the relationship between cross-border mergers and acquisitions (M&A) and financial development in emerging Asian economies. Bilateral data of cross-border M&A for nine emerging Asian economies during 2000–2009 are analyzed with a sample selection model and panel data model. Estimation results show that the banking sector plays a crucial role in facilitating cross-border M&A while the role of equity markets has increased in importance since, in addition to cash, the issuance of common stock and the exchange of stocks have become a popular form for payment for a deal. Because of the relatively thin market, the corporate bond market plays a limited role in supporting cross-border M&A, which is in contrast to the public bond market. The results also show that financial development in terms of stock and bond markets in the home countries tends to be more important when the target firms reside in more developed countries. In addition to financial development, the paper shows that most of the cross-border M&As are invested in the technology-related and resource-based industries while cheap labor industries are relatively less attractive.

The Decline of Investment in East Asia since the Asian Financial Crisis: An Overview and Empirical Examination

A key legacy of the Asian financial crisis of 1997–1998 is a sustained drop-off in the investment rates of East Asian countries that were hardest hit by the crisis. We first review the stylized facts of investment in those countries, and then explore and evaluate the various possible explanations for the decline in investment. In our empirical analysis, which expands upon Park and Shin (2009) by updating the data to include 2005–2008, we investigate the extent to which the investment rates of Asian countries can be explained by the underlying fundamental determinants of investment such as gross domestic product (GDP) growth and demographic variables. We also empirically revisit the various hypotheses put forth to explain the investment drop-off, in particular competitive pressures from the Peoples Republic of China and heightened risk and uncertainty. Our analysis yields two main findings: (i) some evidence of overinvestment in the precrisis period but (ii) very little evidence of underinvestment in the postcrisis period. The results suggest that investment rates are currently more or less at appropriate levels despite their postcrisis decline. The salient policy implication is that quantitatively boosting investment may be less important for future growth than enhancing the investment climate.

Science park, triple helix, and regional innovative capacity: province-level evidence from China

By precipitating a clustering effect and encouraging the establishment of links among firms and academic and research institutions (the so-called triple helix), science parks are expected to have both direct and indirect effects on promoting regional technological capacity. Based on a provincial-level panel dataset over the 1997–2009 period together with adopting patents as an indicator of innovative capacity, this studys empirical results show that science parks, in terms of various measures, indeed have a significantly positive impact on regional patenting. More importantly, science parks play a key role in coordinating research and development (R&D) collaboration across various R&D performers within the region and indirectly contribute to upgrading the regional technological ladder. Moreover, we find a positive innovation-enhancing effect brought about by R&D cooperation between industries and universities, rather than research institutes, highlighting both the importance and inherent problems of Chinas regional innovation systems.

Emerging East Asian Economies As Foreign Investors: An Analytical Survey

This paper documents and analyzes the rise of emerging East Asian economies as major international investors. Foreign direct investment (FDI) from these economies is rising faster than their economic growth, trade and inward FDI, and the region is by far the most important investor from the developing world. We develop an analytical interpretation of the behavior and competitive strategies of major developing East Asian outward investors. We conclude that the drivers of this outward FDI (OFDI) are generally consistent with the international investment literature. But in addition, particular factors are at work, including the desire for natural resource security, and exceptionally high domestic savings rates. The major challenge for the rest of the world is to accommodate these FDI flows, as part of the global reorientation of economic activity toward East Asia.