Takuji Kinkyo

Banking sector resilience to financial spillovers

ABSTRACT By using a large sample of bank-level data, we analyse whether the spillover effects of US financial shocks differ with the fundamental characteristics of the banking sectors in the affected countries. We find that a banking sector characterized by a higher degree of competition and larger margin of safety is less affected by financial spillovers. The results are robust to the inclusion of bank-level control variables that capture individual banks’ lending capacity.

Financial Development and Income Inequality: Long-Run Relationship and Short-Run Heterogeneity

Abstract This article examines the dynamic relationship between financial development and income inequality using the PMG. We find that financial development will reduce inequality in the long run, while it can increase inequality in the short run. Using the estimates of country-specific short-run coefficients, we also find that adverse short-run effects of financial development are associated with the vulnerabilities of countries in terms of their greater susceptibility to crises and poor quality of governance. Good governance seems to be important for achieving inclusive growth though financial development.

Financial development and financial openness nexus: the precondition of banking competition

ABSTRACT We examine the dynamic relationship between financial development and financial openness using the pooled mean group estimator developed by Pesaran et al. (1999). Our results show that financial openness has a positive effect on financial development in the long run, but may have a negative effect in the short run. Using estimates of country-specific short-run coefficients, we also find that the adverse short-run effects of financial openness are associated with a lower degree of banking competition. The system GMM estimator also supports these findings, suggesting that the financial development and financial openness nexus is contingent on the degree of banking competition. A key policy implication is that a higher degree of banking competition is a precondition for financial openness to promote financial development.

Coordinating Regional Financial Arrangements with the IMF: Challenges to Asia and Lessons from the EU

With the proliferation of regional financial arrangements across the globe, there is growing awareness that coordination has to be strengthened between regional and multilateral institutions, notably the IMF. In response to a series of recent financial crises, the EU has developed joint financial programs with the IMF on an ad hoc basis. Despite their relative success, the EU’s experience may not be easily replicated in other regions, such as East Asia, where the institutional basis of regional financial arrangement is still weak. With an increasing incidence of severe and contagious financial crises, there seems to be a strong case for East Asia to develop institutional arrangements that underpin joint rescue operations with the IMF. This chapter argues the case for such arrangements and discusses how they can be developed, drawing on the experience of the EU. It first reviews the progress of East Asian financial cooperation, particularly the Chiang Mai Initiatives, and examines its institutional weakness. It then compares the experience of financial rescue operations between the EU and East Asia, focusing on the conflict and cooperation with the IMF. Finally, it discusses what East Asia should do to develop effective arrangements with the IMF and how the EU can support such efforts.

Global Linkages and Economic Rebalancing in East Asia

In the wake of the global financial crisis, leading industrialized countries have managed to show only a gradual recovery, while East Asian economies have surged ahead. In particular, China achieved growth in excess of 10% in 2010 and is expected to continue growing at a rapid pace. It appears that in the coming years, East Asia will play an even greater role as a growth center leading global economic expansion. Following the Asian currency crisis of 1997–98, consumption and investment in the region decreased considerably, and East Asian economies recovered on the strength of exports. Presently, however, amid a less-than-robust recovery in the US and Europe, the sustainability of East Asias reliance on export-led growth has been called into question. The regions transition to growth based on a balance of foreign and domestic demand is important for both building a stronger foundation for sustainable growth and buttressing global economic expansion. Moreover, the rebalancing of demand in East Asia holds the key to rectifying global current account imbalances — the disadvantage of uneven international capital flows. This unique volume illuminates policy issues involved in the efforts to promote the rebalancing of demand in East Asia. Contents: Decoupling ia A Re-Examination (Hiroshi Tsubouchi and Hideaki Matsuoka) Business Cycle Synchronization and Production Fragmentation in East Asia (Fumihide Takeuchi) Financial Market Linkage in East Asian Countries (Kyosuke Shiotani and Yoichi Matsubayashi) The Impact of East Asian FTAS on the Structure of Demand (Hikari Ban) Inflation Targeting in South Korea, Indonesia, the Philippines and Thailand: The Impact on Business Cycle Synchronization Between Each Country and the World (Takeshi Inoue, Yuki Toyoshima and Shigeyuki Hamori) Globalization and Economic Growth in East Asia (Fengbao Yin and Shigeyuki Hamori) Can South¨CSouth Trade Be a Driving Force for Future Economic Growth? (Shigesaburo Kabe) An Empirical Analysis of the Determinants of Household Saving (Consumption) in China: A Panel Analysis of Provincial Data, 1995¨C2010 (Guifu Chen) Financing Infrastructure Construction in China (Long Ke) Is the Renminbi Appreciating Fast Enough? (Takuji Kinkyo) Readership: Researchers and the general public who are interested in the future development of South East Asia. Key Features: The topic, i.e., Rebalancing Demand in East Asia is a hot issue key to understanding the future development of East Asia This volume provides a comprehensive overview with respect to the topic of Rebalancing Demand in East Asia This book reviews the current situation of each topic, so that readers can easily understand the material This book also empirically analyzes each topic and proposes some policy implications to understand the future development of this region

Changing patterns of Asian currencies’ co-movement with the US dollar and the Chinese renminbi: Evidence from a wavelet multiresolution analysis

ABSTRACT We extend the Frankel–Wei approach by using wavelet analysis to evaluate the relative importance of the dollar and the renminbi as anchor currencies at different time scales. We find that Asian currencies’ co-movement with the dollar weakened after the global financial crisis, while that with the renminbi strengthened particularly after China introduced a new exchange rate management system in 2015. The evidence suggests that emerging Asian economies have recently attached more importance to the renminbi as an anchor in exchange rate management.

Financial Linkages, Remittances, and Resource Dependence in East Asia

The purpose of this book is to empirically analyse the multifaceted nature of financial linkages in East Asia and to discuss the key policy challenges faced by the regions economies. Although the emphasis is placed on East Asia, some of the chapters cover a broader area of countries depending on the aim of the study. Particular areas of focus in these studies include: the evolution of cross-border financial linkages in East Asia; long-run economic consequences of remittance inflows and natural resource dependence; and policy priorities for the financial integration and management of resource-rich economies.

Cross-Border Spillovers of Financial Stress Shocks: Evidence and Policy Implications

The global financial crisis of 2007–09 has promoted a renewed interest in cross-border spillovers of financial stress shocks. Financial stress is a serious disruption to the proper functioning of financial markets that has adverse effects on real economic activity. The US subprime mortgage crisis developed into a full-blown financial crisis, spreading the financial stress quickly to the rest of the world. The underlying cause of the crisis was the combination of excessive risk taking by private sectors and the failure of public sectors to address systemic risks arising from market failures. In response to the crisis, internationally coordinated efforts have been made to increase the resilience of global financial systems by promoting a range of regulatory reforms. However, the question remains as to whether the global financial systems will become much more resilient by the ongoing reforms.

Revisiting the Roles of Financial Access and Deepening for Growth and Reducing Inequality

An introduction is presented which discusses various topics including relationship between financial intermediation and economic growth in China, impacts of financial deepening on economic growth in developing countries and effects of financial deepening on the labor participation ratio

Exchange Rate Flexibility and Economic Rebalancing in China

China has long been accused of keeping the renminbi undervalued so that its export competitiveness can be maintained (IMF, People’ Republic of China: 2004 Article IV Consultation IMF Country Report 064/351, 2004; Bergsten et al., China’s rise: challenges and opportunities, 2009). In response to the international pressures to increase flexibility in the exchange rate regime, the Chinese government introduced a new exchange rate regime in July 2005. Under this regime, the renminbi would be managed with reference to a basket of currencies rather than a single currency of the US dollar. However, the renminbi–dollar rate is kept within a narrow band by massive official interventions in foreign exchange markets and its central rate has been allowed to appreciate only gradually.