Published papers

This research evaluates the impact of oil price shocks on oil producing and consuming economies; we used a simultaneous equation framework for different countries with business relations. As expected, we found that oil-producers (here, Iran and Russia) benefit from oil price shocks. However contrary to previous findings, they also benefit from the indirect effect through their trade partners. For oil-consuming economies, the effects are more diverse. In some countries, output falls in response to an oil price shock, while some others seem to be relatively immune. Generally, those countries which trade more with oil producers gain indirect benefits via higher demand from oil-producers. For instance, the Netherlands, Germany, France, Italy, the US, the UK, and China get a negative direct effect and positive indirect effect from oil producing countries. This is exactly the result that we anticipated. India has both negative effects directly and indirectly and seems to suffer more in a positive oil price shock. For Japan, Spain, Switzerland and Turkey the results are reversed. They benefit from an oil shock directly and indirectly. © 2013 by Koninklijke Brill NV, Leiden.

This paper proposes a floating-interest-rate infrastructure bond, where the interest of a government bond is paid to investors during the period of construction and the early period of operation. Unlike the usual government bond, which provides a fixed interest rate, the proposed floating-interest-rate infrastructure bond pays a floating interest, the rate of which depends on spillover tax revenues. Effective infrastructure projects have a positive effect on the economic growth of a region, known as the spillover effect. When user charges and the return from spillover tax revenues are below the fixed rate of the government bond, the interest rate will equal to the fixed rate of the government bond. In this case, investors in the infrastructure will receive interest on the government bond at the minimum rate. As the spillover effect of the infrastructure increases, the rate of return for infrastructure investment will become greater than the fixed rate of the government bond. The success of the floating-interest-rate infrastructure bond depends on the spillover effect and on transparency and accountability. Policy recommendations are provided in this paper on how to increase the spillover effect and improve transparency and accountability.

“Everything comes from land and ultimately goes back to it” explains an old Indian saying. All sense of value in an enterprise is rooted in the value of land. From business to warfare, the characteristics of land have the power to determine the ultimate success of the endeavour. From maintaining biodiversity to ensuring prosperity for all, the sound management of land resources is vitally important to the achievement of the Sustainable Development Goals (SDGs). The Asian Development Bank notes that more than 400 million Asians still lack electricity; roughly 300 million have no access to safe drinking water, and 1.5 billion lack basic sanitation. In many countries, power outages constrain economic growth. Development of infrastructure is a prerequisite for long-term sustainable economic growth. However, more than 8.8% of the GDP is needed to finance infrastructure-related projects in South Asia which are expected to have a spillover on the achievability of the SDGs.

This paper explores the methods and policies that could enhance the financial connectivity between Europe and Asia in infrastructure investments. We argue that if Asian governments agree to enter into a long-term repayment commitment with a share of spillover tax revenues of public infrastructure projects under a regulatory framework, it could attract European long-term institutional funds in Asia’s infrastructure projects. This approach will reduce divergence in infrastructure between the two regions and encourage regional connectivity. With some empirical evidence, this paper highlights the operational risks and methods of sharing spillover revenue for infrastructure projects.

The main obstacle to the development of Renewable Energy (RE) projects is lack of access to finance. Electricity tariff is often regulated by the government, hence, to increase the investment incentives the spill over effects originally created by energy supplies need to be used. Tax revenues are refunded to the investors in energy projects and such fiscal policy reform will increase the rate of return of energy projects. For smaller-size energy projects, this chapter provides a theoretical model for combining utilisation of carbon tax and a new way of financing risky capital, i.e., Hometown Investment Trust Funds (HITs). Because of the Basel capital requirement, and because most RE projects from the point of view of financers are considered to be risky projects, and thus many financers are reluctant to lend to them or they lend at high interest rates. This chapter theoretically shows that by taxing carbon dioxide (CO ), sulphur dioxide (SO ), and nitrogen oxides (NO ) and allocating those tax revenues to HITs, RE projects will become more feasible and more interesting for hometown investors, hence the supply of investment money to these funds will increase. 2 2 x

Small and medium-sized enterprises (SMEs) are the backbone of the Asian economy. They make up more than 96% of all Asian businesses, providing two out of three private-sector jobs on the continent. Therefore, it is vital for Asia’s economic success that fully functioning support measures for SMEs are in place. However, SMEs face major challenges in accessing cheap finance, mainly because of the asymmetric information problem between suppliers and users of funds and high transaction costs. These lead to more collateral requirements for lending to SMEs with higher lending interest rates, which hinder their growth. As most Asian countries are bank-dominant economies, capital market financing is not a realistic option for SMEs. Therefore, we need to look for solutions that simplify banks’ lending to SMEs. This chapter will highlight the difficulties faced by SMEs in accessing finance and provide measures for mitigating them. The remedies proposed in this chapter include the development of a credit information infrastructure for SMEs, the utilization of credit-rating techniques for SMEs to address the problem of asymmetric information, and the development of a sustainable credit guarantee scheme to resolve the collateral issue.

In this study, we investigate ordering patterns of different types of market participants in Tokyo Stock Exchange (TSE) by examining order records of the listed stocks. Firstly, we categorize the virtual servers in the trading system of TSE, each of which is linked to a single trading participant, by the ratio of cancellation and execution in the order placement as well as the number of executions at the opening of the afternoon session. Then, we analyze ordering patterns of the servers in the categories in short intervals for the top 10 highest trading volume stocks. By classifying the intervals into four cases by returns, we observe how different types of market participants submit or execute orders in the market situations. Moreover, we investigate the shares of the executed volumes for the different types of servers in the swings and roundabouts of the Nikkei 225 index, which were observed in September in 2015. The main findings of this study are as follows: Server type A, which supposedly includes non-market making proprietary traders with high-speed algorithmic strategies, executes and places orders along with the direction of the market. The shares of the execution and order volumes along with the market direction increase when the stock price moves sharply. Server type B, which presumably includes servers employing a market making strategy with high cancellation and low execution ratio, shifts its market making price ranges in the rapid price movements. We observe that passive servers in Server type B have a large share and buy at low levels in the price falls. Also, Server type B, as well as Server type A, makes profit in the price falling days and particularly, the aggressive servers in the server type make most of the profit. Server type C, which is assumed to include servers receiving orders from small investors, constantly has a large share of execution and order volume.

Small and medium-sized enterprise (SMEs) often face severe difficulties raising money. Considering the bank-dominated characteristic of Asian economies, banks are the main source of financing. In order to prevent the accumulation of nonperforming loans in the SME sector, it is crucial for banks to distinguish healthy SMEs from risky ones. This chapter examines how a credit rating scheme for SMEs can be developed when financial and non-financial data are not accessible just by using lending data of banks to SMEs. We employ statistical techniques on five variables from a sample of 3,272 Thai SMEs and classify them into subgroups based on their financial health. The source of data used for the credit risk analysis in this research is the National Credit Bureau of Thailand. By employing these techniques, banks could reduce information asymmetry and consequently set interest rates and lending ceilings for SMEs. This would ease financing to healthy SMEs and reduce the number of nonperforming loans to this important sector.

A credit risk database (CRD) makes it possible to mitigate the problem of information asymmetry between SMEs and financial institutions and contributes to improving SMEs’ access to finance by collecting a large number of financial statements through the mechanism of SME finances and establishing a robust statistical model. In this chapter, we use the CRD in Japan, confirm the situation in Japan, and highlight the CRD’s contribution to evaluating the creditworthiness of SMEs. We also explain how to establish the CRD as a financial infrastructure, while indicating that the CRD and the scoring model based on it have maintained their quality due to their operating system. We hope our experience contributes to the introduction of a statistical CRD composed of a large number of anonymous financial statement data in other countries and that the CRD helps improve SMEs’ access to finance as a financial infrastructure.

This research investigates the interrelationship between the Russian Federation’s main macroeconomic indicators, monetary policy and world oil prices using a vector autoregressive approach and monthly time-series data from January 1993 to December 2016. We selected the Russian Federation for this analysis because it is one of the largest oil exporting countries that is not a member of the Organization of the Petroleum Exporting Countries, and its oil revenues account for a significant proportion of the country’s total export and budget revenues. We assume that oil prices are exogenously given to this country, despite being a large oil-exporter, and explain the oil price transition mechanisms to the Russian Federation’s economy from the export side and through the fiscal channel taking into account the monetary policy factor. The results suggest that the impact of the oil price fluctuations on the country’s gross domestic product, consumer price index inflation rate, interest rate, and exchange rate was more significant between 2000 and 2016 than between 1993 and 1999. To estimate the monetary policy rule for the Russian Federation, we test the modified Taylor equation and associated Taylor rule, including the oil price gap, since the latter may have a significant impact on the key policy rate. The evidence suggests that the Taylor rule describes the post-financial crisis monetary policy of the Russian Federation relatively well.

In the context of growing demand for infrastructure investment in Asian countries including Bangladesh to support higher growth, this chapter discusses various alternative approaches of financing investments. This chapter particularly focuses on the use of spillover tax revenue to attract more private investments in infrastructure. Sharing spillover revenue with private investors will raise the rate of return of the private investors and improve infrastructures to a great extent with less burden on the government’s fiscal budget. Therefore, this approach is expected to create a win-win situation for both the government and private investors. Solving land acquisition related disputes is another key aspect for successful implementation of infrastructure investment projects. Therefore, we propose to use land trust method for acquisition rather than direct acquisition from landowners in order to reduce the cost and minimize the delay in implementation of infrastructure projects. Some innovative financing aspects practiced in Japan and other countries are also discussed.

The objective of this paper is to evaluate if China’s housing market has formulated bubbles in recent years, and the relationship between housing bubbles and banking behaviors. Based on three theoretical models, a set of signaling and early warning bubble indicators are adopted, including growth of M2 and bank loans, indices of Shibor and stock market, ratios of bank loan and real estate loan to GDP, and housing affordability indicators. We observe various signals for housing bubbles in China with reference to Japan in the late 1980s and USA in the 2000s, with more significant bubble signals since 2014. To explore the potential systematic risks for the financial systems (such as the consequences of housing market collapses in Japan and USA), the performances of large and medium sized Chinese banks are examined regarding the impacts of housing prices and other variables on bank loans. Empirical evidence suggests that housing asset appreciation provides higher mortgage collateral for commercial banks, thus increasing bank loan which may speed up the formation of housing bubbles. The findings have rich implications for understanding China’s current challenge in the financial de-leveraging process.

The recent political upheaval transgressing from the industrialization drive through forcible land grab in many parts of Asia (India, Indonesia, Nepal and the Philippines in particular) points to the need for a sustainable policy-a framework that results in a positive sum game, benefiting land owners without hurting growth prospects. Combining the tools from the fields of law and economics, we propose land trust or land lease for the development of infrastructure investment and industrialization purposes. We argue that this is one of the best ways to increase the rate of return to invite private investors into infrastructure investment. Through evidence from the success stories of land trust initiatives in many Asian countries, including India, we aim to showcase the relevance of this alternate method.

Indonesia, a country with the fourth-largest population and abundant energy resources, is yet to fully optimize its potential. Especially, the high cost of logistics, missing links in the road network, and the unstable power supply undermine opportunities to revitalize economic activities. While there is a constant need for developing infrastructures, the country has struggled with tardy or unsuccessful land acquisitions. This research investigates the landowners’ decision-making in the land lease for infrastructure. The investigation of the determinants of leasing will provide insights into land planning and the negotiation process. We find that landlords are less willing to rent out their land if they self-cultivate the plots, if plots have been obtained through inheritance or have been owned for a longer period and if the land area is small particularly in the case of non-wetlands and plots located in their villages. Currently, the compensation is calculated based on the physical value of relinquished property. For the better facilitation of land acquisition for infrastructure projects, it would be advisable to take the above factors into account, as it would encourage landowners to accept the proposed compensation.

The acquisition, administration, and allotment of land for the purposes of development are intimately tied up with the issues of rights, local aspirations, power structures, and economic factors. This book has aimed to explore through diverse perspectives of the land grab crisis and its impact on those displaced within Asia. Throughout, we have sought to establish that land is a crucial factor in attaining sustainable development and approaching it from just an economic perspective would mean to isolate the multiple other factors that involve land management. Evidence from our regional case studies also pointed for the need of a policy framework that we proposed as the land trust method of Japan, explained in Chap. 9.