Robert Dekle

Industrial Concentration and Regional Growth: Evidence from the Prefectures

In this paper, we estimate the impact of dynamic externalities, using direct measures of total factor productivity (TFP) growth at the regional level. We find that, at the one-digit level, significant dynamic externalities exist for the finance, services, and wholesale and retail trade industries, but-contrary to the findings of most previous research-these externalities do not exist for the manufacturing industry.

Domestic Bank Regulation and Financial Crises: Theory and Empirical Evidence from East Asia

A model of the domestic financial intermediation of foreign capital inflows based on agency costs is developed for studying financial crises in emerging markets. In equilibrium for the model economy, the banking system becomes progressively more fragile under imperfect prudential regulation and public sector loan guarantees until a crisis occurs with an expected reversal of capital flows. The crisis in this model evolves endogenously as the banking system becomes increasingly vulnerable through the renegotiation of firm debts. Firm revenues are subject to idiosyncratic firm-specific technology shocks, but there are no aggregate shocks. The model generates dynamic relationships between foreign capital inflows, domestic investment, firm debt and the value of firm and bank equity in an endogenous growth model. Prior to crisis, foreign capital inflows and bank debt rise relative to investment and domestic production. The aggregate portfolio of the banking sector deteriorates and the total value of bank equities declines in proportion to that for goods producers progressively. The models assumptions and implications for the behavior of the economy before and after crisis are compared to the experience of five East Asian countries. The case studies compare three or near-crisis countries non-crisis economies, Taiwan and Singapore, and lend support to the model.

Financial Liberalization and Money Demand in ASEAN Countries: Implications for Monetary Policy

This paper examines the impact of financial market development and liberalization on money demand behavior in Indonesia, Malaysia, Singapore, and Thailand since the early 1980s. The empirical results indicate continuing instability in the interaction of money growth, economic activity, and inflation. Rapid growth and ongoing changes in financial markets suggest that policy needs to be guided by a wider set of monetary and real sector indicators of inflationary pressures. The feasibility of alternative policy frameworks--including nominal exchange rate targets, and inflation targets--is discussed in the context of the substantial and sustained increase in foreign capital inflows.

High Interest Rates and Exchange Rate Stabilization in Korea, Malaysia, and Thailand: An Empirical Investigation of the Traditional and Revisionist Views

The paper seeks to determine whether high interest rates have had the effect of appreciating nominal exchange rates in three Asian countries. The authors use high-frequency data for Korea, Malaysia, and Thailand during the recent crisis and its aftermath to examine the relationship between the increase in interest rates and the behavior of exchange rates. It is found that raising interest rates has had a small impact on nominal exchange rates during the crisis period.

Deposit Insurance, Regulatory Forbearance and Economic Growth: Implications for the Japanese Banking Crisis

An endogenous growth model with financial intermediation demonstrates how deposit insurance and prudential regulatory forbearance lead to banking crises and growth declines. The model assumptions are based on features of the Japanese financial system and regulation. The model demonstrates how banking and growth crises can evolve under perfect foresight. The dynamics for economic aggregates and asset prices predicted by the model are shown to be generally consistent with the experience of the Japanese economy and financial system through the 1990s. We also test our maintained hypothesis of rational expectations using asset price data for Japan over the 1980s and 1990s.

Whither Chinese Growth? A Sectoral Growth Accounting Approach

We perform a growth-accounting exercise for Chinese economic growth from 1978 to 2003, by decomposing Chinese growth in GDP per labor into the contributions arising from the agricultural, public, and private sectors; and the contribution arising from the reallocations of labor among these three sectors. The greatest contributor to overall labor productivity growth (contributing 30% of the overall) is the growth in total factor productivity in the private nonagricultural sector. The next largest contributor (26% of the overall) is the reallocation of labor from the agricultural sector to the nonagricultural sector.

The yen and Japanese manufacturing employment

Abstract Using two-level industry-level data from 1975 to 1994, we estimate the effects of fluctuations of the yen, through movements in foreign prices, on Japanese manufacturing employment. First, we find that an exchange rate induced change in foreign industry-specific prices has a sizeable effect on Japanese employment in the long-run. Second, we cannot detect any difference between the high and low export sectors in their responsiveness to exchange rates. A by-product of our research is the construction of industry-specific real exchange rates for Japan that are probably the most careful to date, allowing us to examine the changing competitiveness of Japanese industries.

The Japanese Banking Crisis and Economic Growth: Theoretical and Empirical Implications of Deposit Guarantees and Weak Financial Regulation

An endogenous growth model with financial intermediation is used to show how government policies towards the financial sector can lead to banking crises and persistent growth slumps. The model shows how government deposit guarantees and regulatory forbearance can lead to permanent declines in the growth rate of the economy. The effects of inadequate prudential supervision on asset price dynamics under perfect foresight are also derived in the model. The policies that are used in the analysis are based on essential features of Japanese financial regulation. The implications of the model are compared to the experience of the Japanese economy and financial system during the 1990s. We find that the dynamics predicted by our model are generally consistent with the recent behavior of economic aggregates, asset prices and the banking system for Japan. A policy implication of the model is that the impact on future economic growth depends upon the length of time the government fails to enforce loan-loss reserving by banks.

Financial liberalization and money demand in the ASEAN countries

We estimate long-run money demand equations for the ASEAN-4 countries (Indonesia, Malaysia, Singapore, and Thailand) and evaluate whether the equations are cointegrated. Despite the substantial financial liberalization that has taken place in these countries, we find that the money demand equations are cointegrated. In sum, our results show that provided that the monetary authorities know the shape of these money demand equations, a policy framework aimed around monetary targets can be implemented. Copyright @ 1999 by John Wiley & Sons, Ltd. All rights reserved.

Do high interest rates appreciate exchange rates during crisis? The Korean evidence

This paper tries to answer the following basic question: have the high interest rates had the desired effect of appreciating the nominal exchange rates in the Asian crisis countries? We use Korean high-frequency (weekly) data during the crisis and its aftermath to examine the relationship between the increase in interest rates and the behaviour of exchange rates. We find that the lead-lag relation between the exchange rate and the interest rate clearly indicates that raising the interest rate has had the usual impact of appreciating the nominal exchange rate during the crisis period. Copyright 2001 by Blackwell Publishing Ltd