Author: Yoshiyasu Ono, Osaka University

In both the journalistic and academic literature on the exchange rate it is commonly believed that the value of a country’s currency reflects its economic power.　As far as the yen/US dollar exchange rate is concerned, however, this seems not to be the case. The rate was 140~160 yen per dollar during the bubble period of the late 1980s but 80~110 yen/dollar during the stagnation period of the 1990s as well as during the past decade.

Open economy macro-dynamic theory tells us that a currency’s value adjusts so that the current account changes in a way that reflects differences between countries in their rates of time preference. Read the rest of this entry »

Author: Andrew Elek on behalf of the Australian Committee for Pacific Economic Cooperation (AUSPECC)

On December 4-5, 2009, the Australian Government convened a ‘one-and-a-half track conference’ of prominent government officials, academics and opinion makers. In this week’s digest, Peter Drysdale reports on the meeting which discussed the form an Asia Pacific community might take and the role of existing forums (including APEC) within evolving regional institutional architecture.

Drysdale and Hadi Soesastro have made a useful recommendation for how Prime Minister Rudd’s proposal, could be advanced by a council of the leaders of the G20 members of APEC, together with India. Read the rest of this entry »

Author: Stephen Howes, ANU

In the second assessment report of the International Panel on Climate Change (IPCC), back in 1995, the scientists of the world concluded only that the ‘balance of evidence’ supported a link between human action and global warming. This was the slender basis on which the Kyoto Protocol was negotiated.

In the IPCC’s third assessment report of 2001, the scientists were more confident saying that it was ‘likely’ that there was a link: they even attached a probability assessment to this statement – 60 to 90 per cent. The fourth IPCC assessment report of 2007 increased this probability to ‘very likely’: greater than 90 per cent. Read the rest of this entry »

Author: Richard Rigby, ANU China Institute

There are many ways in which a relationship can be mutually beneficial – diplomatically, politically, commercially, educationally, economically. As someone who’s been involved in the Australia-China relationship in one way or another since the beginning of the 1970s, I’m struck by how one can now tick more and more items off, and add new one’s to the list.

The decision to establish relations in late 1972 with the election of the Whitlam government was clearly mutually beneficial, otherwise we wouldn’t have done it.

Read the rest of this entry »

Author: Sandy Gordon

Problems with overseas students are not new. Former Prime Minister Bob Hawke famously cried over the Tiananmen Square massacre in 1989 and agreed to let 10,000 Chinese students stay. Many of them were on dubious short courses and on visas of doubtful provenance. Nevertheless, those who stayed have mostly made excellent citizens.

Nor are the twin problems of dodgy training providers and violence against overseas students unique to Australia. According to the BBC, ‘Tens of thousands of foreign students may have entered the UK to study at bogus colleges … before the system of accreditation was tightened up this year’. That system was tightened up not because of concerns about providers, but on grounds of security. Ten Pakistani ‘students’ suspected of terrorism were found to be ‘attending’ colleges for various short courses that were clearly little more than an immigration scam.

Read the rest of this entry »

Author: Ron Huisken

Twenty years ago, Japan and Australia spearheaded a drive to create a forum for the states of the Asia Pacific to collectively consider how to advance their shared interests in a more liberal trading regime. This became Asia Pacific Economic Cooperation or APEC, the first official (or Track One) multilateral acronym in the region (other than the sub-regional Association of Southeast Asian States – ASEAN – which dates from 1967). Establishing APEC was a major, and difficult, accomplishment. The Asia Pacific was (and, of course, still is) a vast and diverse region. Moreover, it had little pedigree in, and weak instincts to, surrender of any sovereign rights to multilateral processes. The difficulties are manifest in the title of the forum – four adjectives in search of a noun, as one wit observed – and in the fact that it was a gathering of member economies, not of states, in order to finesse Taiwan’s participation. But APEC has endured. Since 1993, at the initiative of the US, it has involved Heads of Government. Even though its formal mandate has remained confined to trade liberalisation, HOGs have found the opportunity for low-key bilateral negotiations to be sufficiently attractive to continue to turn up.

Read the rest of this entry »

Guest Author: Nadeem Ul Haque

Egoism has led to a certain form of transparency in Pakistani government and it is disturbing. Most government offices now have nice wooden boards posted on the walls. These wooden boards have the names of officials who served in those offices as well as the dates of their tenure.

In recent visits to many of these offices, I did a quick calculation and found that the tenure of officials in a posting has been extremely short. Most officials are lucky if they remain in a position for more than a year. Secretaries are rotated out almost on a yearly basis, customs officials are lucky if they last a few months and the director cooperatives board is moved so rapidly that the poor director probably remains in a daze.

Why do we have such quick transfers? The explanation is a combination of the following 4 factors. Read the rest of this entry »

Guest Author: Andrew Sheng

We are seeing a change all over Asia.  Thanks to Asian giants like Gandhi, Nehru, Mao and Deng, the revival of India and China is changing the 21st century.

If we were to take a grand macro-historical perspective, with India and China both growing at more than 8 per cent per year, whilst the G-3, US, Europe and Japan are growing at less than 2 per cent a year, the relative power between the mature economies and the emerging markets is changing dramatically.

Angus Maddison projects that, by 2018, China will overtake the USA as the largest economy in the world, with India as number 3. By 2030, he estimates that Asia (including Japan) would account for 53 per cent of world GDP, whereas the US and Europe would only account for 33 per cent.

If this were the case, the global financial architecture would have to be significantly different from the present.

Read the rest of this entry »

Author: Tobias Harris

The transition from the Bush administration to the Obama administration has been met with angst in Tokyo. Japanese politicians and bureaucrats worry that after eight years of working with an administration that has repeatedly maintained that the U.S.-Japan alliance is the key relationship for the U.S. in Asia, it will face an administration more focused on the relationship with China than with Japan.

The reality, of course, is that the so-called “golden age” of the U.S.-Japan relationship ended several years ago, if it existed at all.

The first half of the decade was marked by a flowering of security cooperation between the U.S. and Japan that grew out of bilateral negotiations in the late 1990s. Following the acrimony of early 1990s trade disputes, the allies agreed in 1996 to refocus on the security relationship.

Read the rest of this entry »

Author: Peter Drysdale

Harold James, Professor of History and International Relations at Princeton University, writes that only China has the firepower and capacity to rescue the international financial system from the threats from America’s financial meltdown today (Project Syndicate, September 2008). This is not just a financial and economic crisis, he suggests. Rather, like the financial and economic shocks that led to the Great Depression through the 1920s and 1930s, it is a drama that must play out on the world geopolitical stage.

Sound a little over-stretched? Perhaps. But there is no doubt that China’s response to the events that are unfolding in America will be pivotal to how readily the global economic and political system digests their impact in the medium and longer term.

China is today’s America, claims James. When the 1920s and ’30s crisis hit, America alone had the capacity to take the big public sector action at home that was needed to stem the panic and economic collapse and the reserves to save Europe and the rest of the world from massive contagion. Andrew Mellon, US Treasury Secretary of the time, resolutely stood back, determined to let markets collapse and ‘purge the rottenness out of the system’. The collateral economic and geopolitical damage from that adjustment path through the markets was well and truly done before Roosevelt’s New Deal was put in place. Then, and now, a globalised world means that the solution to such crises spans borders. Read the rest of this entry »

Author: Peter Drysdale

Whoever takes the Presidency next year, Asia will be need to be a bigger part of the US foreign policy agenda than it has been under President Bush. That’s the heart of the argument, too, in Yoichi Funabashi’s piece on ‘Keeping up with Asia’ in the latest issue of Foreign Affairs. (Link)

That’s not the conventional wisdom in most places. Geoff Garrett, head of the American Studies Centre at Sydney University argued the exactly opposite on Thursday at a talk at the Crawford School on ‘the US Presidential Elections and Their Impact on Australia’. Whether it’s McCain or Obama, it is pre-occupation with the Middle East and Afghanistan that will continue to dominate the US foreign policy agenda, so the conventional wisdom runs.

Read the rest of this entry »

Author: Shiro Armstrong

The incidence of suicide in Japan appears high. Are there insurance incentives to suicide? Indeed, Chen, Choi and Sawada in a recent paper titled Suicide and Life Insurance find a positive relationship between the suicide rate and the availability of life insurance with a death benefit associated with suicide. They claim that suicide is a rational decision after taking into account the exemption period (the period that the death benefit is not available after the insurance is purchased – to minimise adverse selection).

It is apparently not uncommon to have life insurers provide a payout for suicide. Most OECD countries have the option of a death benefit in life insurance payable in the event of suicide with exemption periods ranging from 1 to 3 years.

What is the social rationale for having such insurance options? Should a regulatory authority or supervisory body in the insurance industry allow insurance that, in some circumstances, provides incentive for suicide? You can imagine the adverse selection problems that arise. Read the rest of this entry »

Author: Ryan Manuel

As a further to last week’s article on sport and markets, this article in today’s Australian shows the dilemma facing modern sports administrators, with one of our top javelin prospects moving to the NRL instead

When there is a better funded, non-Olympic sport people will generally switch. There aren’t too many 17 year old boys who would choose differently.

Author: Ryan Manuel

Milton Friedman famously once said that if governments ran the Sahara there would be a shortage of sand.

So, other things equal, a quick look at the Olympic games should show a shortage of gold medals for countries using government run sport systems. Shouldn’t it?

In a word: no, though other things are not equal and that’s a concession in the argument that follows that needs to be acknowledged up front. Government run sports systems seem, on the whole, to be highly successful. Cuban boxers, Indonesian badminton players and Chinese… er, anything players, are all salient examples. State-run sports systems, on the macro level, appear to remain the model for success in Olympic games.

But other things are not equal.
Read the rest of this entry »

A Loyal Reader has added further depth to Jane Golley’s piece on China’s “great balancing act” and Hugh White’s comments. They write:

As my former HOM would have said, the argument is “completely fallacial”.

Seeking equidistance between China and the US will only serve to reduce our leverage over both. We get more out of both under the current arrangement.”

The big question to come out of this then is what exactly are the “current arrangements” (emphasis on “current” as against 1996-2007)?

Comments?