Asian Development Review

Advancements in information and communication technology (ICT) have expanded the possibilities for trade in modern services. Many emerging and developed Asian economies are increasingly participating in these new trade activities. This study examines the export performances of emerging and developed Asian economies in selected modern services—computer and information, business and professional, and telecommunications—using a stochastic frontier gravity model. Estimation results show that the performances of emerging economies in South Asia and the Association of Southeast Asian Nations (ASEAN), in terms of realization of export potential, are considerably weaker than those of developed economies in North America and Europe. The results show that the number of graduates and the quality of ICT infrastructure in emerging economies are among the key factors in realizing services export potential. These findings suggest that emerging economies need to remove behind-the-border constraints and adopt advanced technologies to catch up with high-performing developed economies.

The existing literature has highlighted the positive effect of foreign direct investment (FDI) on export upgrading and associated terms of trade in developing economies. However, the FDI effect has been found to be negative in South Asia. In this paper, we elaborate on the South Asia-specific effect by emphasizing the role of human capital in the positive link between FDI and terms of trade. We argue that education levels in South Asia have lagged behind those in East Asia and other developing regions. This has resulted in a world market integration strategy in South Asia that specializes in less skills-intensive products and generates associated FDI flows. We demonstrate these patterns for two South Asian economies (Bangladesh and Pakistan) and two East Asian economies (Malaysia and Thailand) for which historical breakdowns of FDI data are available.

More than one-third of the World Trade Organization-notified services trade agreements that were in effect between January 2008 and August 2015 involved at least one South or Southeast Asian trading partner. Drawing on Baier and Bergstrand's () determinants of preferential trade agreements and using the World Bank's database on the restrictiveness of domestic services regimes (Borchert, Gootiiz, and Mattoo ), we examine the potential for negotiated regulatory convergence in Asian services markets. Our results suggest that Asian economies with high levels of preexisting bilateral merchandise trade and wide differences in services regulatory frameworks are more likely candidates for services trade agreement formation. Such results lend support to the hypothesis that the heightened “servicification” of production generates demand for the lowered services input costs resulting from negotiated market openings.

This paper estimates augmented versions of the Investment–Saving curve for the People's Republic of China in an attempt to examine the relationship between monetary policy and the real economy. It endeavors to account for any structural break, nonlinearity, or asymmetry in the transmission process by estimating a breakpoint model and a Markov switching model. The Investment–Saving curve equations are estimated using a Monetary Policy Index, which has been calculated using the Kalman filter. This index will account for the various monetary policy tools, both quantitative and qualitative, that the People's Bank of China has used over the period 1991—2014. The results of this paper suggest that monetary policy has an asymmetric affect depending on the level of output in relation to potential, and that the People's Republic of China's exchange rate policy has restricted the effectiveness of the People's Bank of China's monetary policy response.

We propose a new dynamic transition analysis on the basis of a small open economy dynamic stochastic general equilibrium model. Our proposed analysis differs from existing static and conventional dynamic analyses in that shifts from a fixed exchange rate regime to a basket peg or a floating regime are explicitly explored. We apply quantitative analysis, using data from the People's Republic of China and Thailand, and find that both economies would be better off shifting from a dollar peg to a basket peg or a floating regime over the long run. Furthermore, the longer the transition period, the greater the benefits of shifting to a basket peg regime from a dollar peg regime owing to limited volatility in interest rates. Regarding sudden shifts to a desired regime, the welfare gains are larger under a shift to a basket peg if the exchange rate fluctuates significantly.

In the first decade of this millennium, rising food prices returned as a concern for policy makers, especially in developing economies. This paper examines how supply shocks, both domestic and foreign, impacted imports and consumption in the world rice market between 1960 and 2010. Such an investigation is important in assessing the role of trade in compensating for domestic shocks. If shortages lead economies to impose trade restrictions, then trade may not be allowed to play an important role in stabilizing consumption. The existing literature has highlighted the importance of these policy shocks in the world rice market and how they have worked to increase the volatility of prices and trade flows. Although trade cannot be expected to play a strong role when the major producing and consuming economies are simultaneously hit by negative yield shocks, such a scenario has occurred in only about 3% of all observed cases. We also find that consumption fails to stabilize even when domestic shocks are negative and foreign shocks are positive; however, imports do peak. Thus, while trade does help in coping with domestic risks, it is unable to achieve full risk sharing. Therefore, no matter the nature of foreign shocks, the principal concern is to stabilize consumption when an economy is hit by negative domestic yield shocks. The frequency of such shocks is about 12% in all observed cases, highlighting the importance of domestic responses. We find that domestic rice stocks have been important in stabilizing consumption. The reliance on domestic policies has, in turn, kept the rice market thin.

This paper examines the effects on educational attainment of assistance programs that provided typhoon-resistant secondary schools and instructional resources in the Philippines. Using the variation in the availability of assistance programs and differences in exposure across age cohorts induced by the timing of the allocation of program packages, I find positive and statistically significant impacts on education outcomes for both boys and girls. For boys, the presence of typhoon-resistant schools equipped with instructional resources led to an average increase of 0.26–0.31 years of education, while the presence of instructional resources alone led to an average increase of 0.23–0.26 years of education. For girls, the availability of both components led to an average increase of 0.23–0.32 years of education, while the availability of either component alone did not seem to have an effect.