Download Comments on Capital Flows and Excess Saving

Comments on Capital Flows and
Excess Saving Session
Iwan J Azis ([email protected]) [email protected])
ADBI, Tokyo, February 8, 2012
Flow-of-Fund
1
2
GDP, Financial Development, and Employment Elasticity—
Emerging Asia1 (model based)
$ billion (others)
9,000
Elasticity
0.35
Pre-AFC (1990-1997)
0.31
8,000
0.30
Employment
Elasticity2
7,000
0.25
6,000
4,000
3,000
0.20
Post-AFC
(1999-2009)
5,000
0.15
Financial market
asset/capitalization3
0.15
0.10
2,000
0.05
GDP
1,000
0
1990
1993
1996
1999
2002
2005
0.00
2009
2008
AFC = Asian Financial Crisis, GDP = gross national product.
1Includes People's Republic of China (PRC); Hong Kong, China (HKG); India (IND); Indonesia (INO); Republic of Korea (KOR); Malaysia (MAL);
Philippines (PHI); Singapore (SIN); Taipei,China (TAP); and Thailand (THA). Excludes Brunei Darussalam, Cambodia, Lao PDR, Myanmar, and
Viet Nam due to inavailability of long time series. GDP and financial market capitalization are in real terms. 2Computed by running a regression
model of formal employment against real GDP, inflation and lending rate for each country. Aggregated by using nominal GDP in US dollars as
weights. 3Includes deposit money bank assets, and stock market and bond market capitalization.
Source: Thortsen Beck and Asli Demirgüç-Kunt, "Financial Institutions and Markets Across Countries and over Time: Data and Analysis", World
Bank Policy Research Working Paper No. 4943, May 2009; World Economic Outlook Database, International Monetary Fund; and World
Development Indicators, World Bank.
GDP, Financial Development, and Income Inequality—
Emerging Asia
$ billion (others)
GINI Index
9,000
45
8,000
40
GINI Index1
7,000
35
6,000
30
5,000
25
Financial market
asset/capitalization2
4,000
20
3,000
15
2,000
10
GDP
1,000
5
0
1990
1993
1996
1999
2002
2005
2008
0
2009
Note: Emerging Asia includes People's Republic of China (PRC); Hong Kong, China (HKG); India (IND); Indonesia (INO); Republic of Korea (KOR);
Malaysia (MAL); Philippines (PHI); Singapore (SIN); Taipei,China (TAP); and Thailand (THA). Excluded Brunei Darussalam, Cambodia, Lao PDR,
Myanmar, and Viet Nam due to inavailability of long time series. GDP and financial market capitalization are in real terms.
1Weighted using nominal GDP in US dollars. Data for PRC and THA until 2004; IND, MAL, TAP (2005); HKG, PHI (2006); and KOR (2008).
Previous period's figure was used to complete the series until 2009.
2Includes deposit money bank assets, and stock market and bond market capitalization.
Source: Thortsen Beck and Asli Demirgüç-Kunt, "Financial Institutions and Markets Across Countries and over Time: Data and Analysis", World
Bank Policy Research Working Paper No. 4943, May 2009; World Economic Outlook Database, International Monetary Fund; and World
Development Indicators, World Bank.
3
4
Foreign Holdings in LCY Government Bonds
%
35
31.35
30
25
Indonesia
22.03
20
15
Malaysia
Korea
10
Japan
5
Thailand
0
Jan-96 Jan-97 Dec-97 Dec-98 Nov-99 Oct-00
Oct-01 Sep-02 Aug-03 Aug-04
Jul-05
Jun-06 Jun-07 May-08 Apr-09
10.14
8.38
5.03
Apr-10 Mar-11
Note: Data as of March 2011.
Source: AsianBondsOnline.
Liquidity & Bonds
• Pawnbrokers make loans to liquidity-searching
customers (SME, SMH) using their personal
property as collateral: Perum Pegadian (PP)
Indonesia’s chain of state-owned pawn shops
 900 shops across the country, lending at
lower  Most people return to redeem the
pawned items
• PP plans to price its 1.5 trillion rupiah bond
issue in June 2012 with yields ranging from
10-14 percent (5, 8, 10 years)
5
Capital Inflows and Currencies Appreciation
Figure XX: Change in Exchange Rate vis-à-vis US dollar1 (%)
Change in Exchange Rate vis-à-vis US dollar1 (%)
Thai baht
12.3
2009
2010 YTD
Malaysian ringgit
10.0
Singapore dollar
8.5
Philippine peso
5.7
Indonesian rupiah
5.1
Taipei,China NT dollar
5.1
Korean won
3.5
2
PRC renminbi
2.9
Hong Kong dollar
Vietnamese dong
0.1
-5.2
-6
-2
2
6
1
10
Year-to-date (YTD) figures based on 10 Nov 2010 closing. Negative values indicate depreciation.
Year-to-date
(YTD) figures based on 10 Nov 2010 closing. Negative values indicate
2
PRC = People's Republic of China.
2 PRC
= People's Republic of China.
Source: OREI staff calculations based on Reuters data.
1
14
18
depreciation.
11
Source: OREI staff calculations based on Reuters data.
Capital flows Fluctuation and Currencies Depreciation
Figure XX: Exchange Rates against US dollar1
(1 Sep 2011 to 12 Dec 2011, % change)
Korean won -7.4
Singapore dollar -7.4
Indonesian rupiah
-5.7
-5.5
Malaysian ringgit
Taipei,China NT dollar
-4.1
Thai baht
-3.9
-2.8
Philippine peso
-1.3
Japanese yen
-0.8
Vietnamese dong
Hong Kong dollar
-0.01
PRC renminbi
0.3
-8
-6
-4
-2
0
2
PRC = People's Republic of China.
Note: Positive values indicate appreciation; negative values indicate depreciation.
1Latest closing as of 12 Dec 2011, based on local currency value of the $.
Source: ADB calculations using data from Reuters.
6
PRC
Korea &
Japan
ROW
PRC
ASEAN
ROW
7
Intraregional Exchange Rate Stability and Trade
Rationale: Post Great Recession (push factor) combined with stable and
strong growth & return  Capital flows; Policy response is less effective, create
distortion & Spill-over effects, Intraregional trade
Preventing Factors: Modality & non-economic sensitivity
Stages: Institution-lite, ownership, basket with different composition & weights
 then standardized PLUS regulatory harmonization & shared governance
practice
Exchange Rate and Capital Flows
Coordination/Cooperation?
• Cooperation essential due to interdependencies;
spillover and contagion effects
• Exchange rate stability needed for intra-regional trade,
production network efficiency, reducing trade surplus
and helping to stimulate investment (all of which will
support the region’s “rebalancing” efforts)
• Bandid: “Collaboration of policy responses to capital
flows at a regional level between countries can be
effective”
• Start with informal arrangements with no new institutions
– Policy dialogue and discussion
– Loose agreements
16
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