Commentaries, Research Papers
& Various Other Thoughts



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International Political Economy

  • Political Economic Pressures in Financial Crisis Resolution   Adobe Acrobat Required

    Abstract: The free flow of global capital has resulted in destabilizing financial crises, coupled with significant redistributive effects. However, the existing literature has not adequately addressed the channels for this redistribution, nor the different factors that influence the formation of post-crisis redistributive policy. This paper develops a microfounded theoretical model that applies the modeling framework of special interest lobbying together with bilateral bargaining to the formation of equilibrium lending, bailout, and reallocation decisions. The paper then takes the theoretical model to the data, testing two key predictions of the model using both micro- and macro-level datasets. Finally, implications for international financial reform are then examined in light of the model's findings.

    Notes: Doctoral dissertation, chapter 1. | Case Study Appendix | Foils | [Stata Log]

  • Special Interests, Regime Choice, and Currency Collapse   Adobe Acrobat Required

    Abstract: With heterogeneous productivity and sticky prices in the short run, exchange rate changes can generate real effects on agents in the economy; the result is that the currency regime becomes a policy variable amenable to political competition. This paper discusses how special interests and government policymakers interact in the decisionmaking processes concerning the optimal level of the exchange rate, and how these interactions may lead to a disconnect between the exchange rate and economic fundamentals which---under appropriate conditions---may affect the timing, and possibility, of a currency crisis. Three extensions to the benchmark model consider the possibility of a semi-independent monetary authority, the existence of a legislature, and electoral pressures.

    Notes: Doctoral dissertation, chapter 2. | Mathematical Appendix | Foils | [Stata Log]

  • Endogenous Social Change   Adobe Acrobat Required

    Abstract: Social movements---and contentious politics more generally---have been a feature of both developing and developed countries throughout history, and have had a significant impact on the societies from which they arose. In this paper, we develop a model of social movement emergence and contentious politics that is not critically dependent on active elite support, but rather on strategic interactions among movement actors, as well as potential social relationship effects. In doing so, we accommodate the idea of both positive and negative selective incentives, and how these are impacted by exogenous shocks. Our framework is also flexible enough to incorporate multiple contracting mechanisms, elite involvement, and informational imperfections. Finally, we examine the empirical validity of our model with case studies of Indonesia during the Asian financial crisis and conflict in the Congo.

    Notes: Coauthored with Thorsten Janus. Doctoral dissertation, chapter 3. | Foils | Poster | [MATLAB Code]

  • Political Risk and the Exchange Rate   Adobe Acrobat Required

    Abstract: Political factors are often cited as potential determinants of the nominal exchange rate. However, empirical exchange rate models seldom capture this influence. This paper applies the Markov regime-switching model to identify regime switches for a sample of 25 countries over an 8-year time period. It then uses the estimated transition probabilities obtained as observations for the dependent binary variable in a panel Probit model, which includes political risk as an independent variable. The study finds that political risk exerts a (marginally) statistically significant contemporaneous effect on the nominal exchange rate. Furthermore, while only contemporaneous political risk is important for developed economies, both contemporaneous as well as lagged political risk play a role in developing countries. Finally, the study also finds some weak evidence that, after the Asian financial crisis, currency traders in emerging markets have learnt to better incorporate political risk into their buy and sell decisions.

    Notes: Best graduate student paper, IEA Meeting 2003. [Gauss Code | Stata Log]

  • What Fundamentally Drives Growth?   Adobe Acrobat Required

    Abstract: The recent empirical growth literature has proposed three underlying fundamental determinants of economic growth, namely, physical geography, economic integration, and institutional quality. This paper unpacks the final determinant into both political-economic institutions as well as the primarily political institution of democratic development. Using both cross-sectional and panel datasets, we show that, properly instrumented, political-economic institutional quality matters, while there is no evidence that democracies grow faster or slower than non-democracies. This result is in contrast to much of the more recent literature, which tend to find a weakly positive relationship. Political economic institutions, however, remain positive and significant determinants of economic growth, which corroborates much of the empirical evidence in the existing literature.

    Notes: Coauthored with Jess Decker. | Foils | [Stata Log] | Published

  • Democracy & Trade   Adobe Acrobat Required

    Abstract: The theoretical discussion on globalization has suggested that there are linkages between democracy and trade, although the direction of influence is less certain. Formal empirical studies remain scarce, and have often focused on the question of whether democratic regimes influence trade policy, as opposed to the actual relationship between democracy and trade. This paper seeks to answer the question, ``Do democracies trade more?'' by applying the gravity equation to a large dataset of bilateral trade data for the period 1948-1999, while taking into account the role of democracy. It finds that democracy has a positive effect on trade flows, but only after controlling for trade pair heterogeneity. In addition, it makes the case for studies of this nature to draw a distinction between trade flows in the pre- and post-1990s period of rapid democratization as well as between developed and developing countries.

    Notes: Coauthored with Jess Decker. | [Stata Log] | Published


International Finance

  • Micro Impact of Financial Crises   Adobe Acrobat Required

    Abstract: The existing literature on international financial crises has tended to focus on macroeconomic aspects, such as weaknesses in macroeconomic fundamentals and self-fulfilling expectations. More recent work has sought to fill in the gap in the microeconomic impact of financial crises. This paper utilizes a longitudinal household survey dataset for Bulgaria to examine differences in consumption expenditure from the year 1995 to 1997, during which time the economy experienced a financial crisis. Its primary finding is that the crisis had differential impacts on different groups in society, and these groups are represented in terms of both their asset and production dimensions as well as by their socioeconomic and demographic dimensions.

    Notes: Coauthored with Jon Adams-Kane. Bulgarian National Bank Discussion Paper DP/46/2005. Honorable mention, SWEA Meeting 2005. | Working Paper [Stata Log]

  • Competitive Devaluations: Bitter Pill or Bad Medicine?   Adobe Acrobat Required

    Abstract: Devaluation and crises in emerging economies have tended to be followed by an outright economic collapse. This post-devaluation economic contraction is inconsistent with the conventional view that devaluation is expansionary/inflationary and needs to be accompanied by demand deflationary monetary and fiscal policy. This paper undertakes a detailed empirical analysis to determine whether real devaluation is contractionary rather than expansionary in the case of Thailand, which was the “trigger” country in the East Asian crisis of 1997-98.

    Notes: Coauthored with Tracy Yang. | Published

  • Crisis, Contagion, and East Asian Stock Markets   Adobe Acrobat Required

    Abstract: Following the 1997 financial crisis in East Asia, the issue of contagion has resurfaced. Contagion has most often been associated with high frequency events; hence, it has been measured on stock market returns, interest rates, the exchange rate, or linear combinations of them. This paper tests for evidence of contagion between selected East Asian stock markets, thereby exploring the importance of the linkages between stock markets as a transmission channel during the crisis.

    Notes: Coauthored with Tracy Yang. | Published

  • Whither EMU? Revisiting the EMU, One Year On   Adobe Acrobat Required

    Abstract: This essay seeks to draw together the diverse range of arguments pertaining to the economics of monetary integration and attempts to provide a formal framework for the study of monetary unions. Where possible, models are used to flesh out the more common verbal arguments that are often found in the literature, and where relevant, empirical work on European Monetary Union is reviewed and critiqued. The latter part of the paper draws on recent data for the euro-zone and attempts to assess the success of monetary integration in Europe with respect to the economic arguments already put forward. In particular, main macroeconomic indicators such as prices, unemployment and investment are examined and interpreted in the light of economic reasoning.

    Notes: This is---in the main---my masters thesis.

  • Optimal Choice of Exchange Regime: Australia   Adobe Acrobat Required

    Abstract: As the global economy moves toward greater financial and economic integration, the exchange rate regimes of individual nations have become an important policy issue. National choices have provided little consensus about which of the different regimes is preferred. This paper aims to provide an answer to the choice of exchange rate regime through the estimation of the optimal degree of exchage rate intervention, with respect to minimizing output variance, for the Australian economy. The results show that, for the case of Australia, the freely floating regime first introduced in 1976 and fully implemented in 1983 is not the optimal arrangement when the objective is to minimize the volatility of output. With such an objective, a managed float regime with a degree of intervention biased toward "leaning with the wind" is optimal. The results also show that the Reserve Bank has in fact been engaging in a "leaning with the wind" policy that is close to optimal.

    Notes: A shortened, slightly more digestible form of my undergraduate honors thesis.


International Trade

  • Trade Openness Reduces Growth Volatility When Countries are Well Diversified   Adobe Acrobat Required

    Abstract: This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, we present strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. We also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.

    Notes: Coauthored with Mona Haddad and Christian Saborowski. World Bank Policy Research Working Paper 5222. | Working Paper [Stata Log]

  • Export Diversification in a Transitioning Economy: The Case of Syria   Adobe Acrobat Required

    Abstract: Understanding the growth-inducing effects of trade liberalization requires a thorough understanding of the policies and processes underlying export diversification. How does government policy that explicitly engages in trade liberalization affect the process of export diversification in the economy? Furthermore, conditional on such policy, what are the directions in which exports diversify? This paper seeks to examine these questions by exploiting a directed policy effort by Syria to liberalize its trading sector beginning in 2001. The primary advantage offered by the Syrian case is that the policy in question was largely prompted by a political decision, reached independently of contemporaneous structural changes in the economy. As a consequence, Syrian trade liberalization can be analyzed under this quasi-experimental setting, which helps identify the effect of the policy on actual diversification outcomes.

    Notes: Coauthored with Christian Saborowski.

  • Estimates of Trade-Related Adjustment Costs in Syria   Adobe Acrobat Required

    Abstract: The scope and complexity of international trading arrangements in the Middle East, as well as their spotty historical record of success, underscores the urgent need for an adequate understanding of the relative costs and benefits of participation in preferential trading arrangements and, more generally, of changes in the domestic import regimes. This paper seeks to address this problem by providing estimates of the adjustment costs associated with two broad classes of hypothetical trade policy scenarios scenarios for Syria: Participation in preferential trading arrangements, and changes in the domestic import regime. We find that the revenue consequences of the first scenario may be substantial, while our analysis of the second scenario suggests that the number of tariff bands can be reduced to a lower number, while ensuring revenue neutrality, via the introduction of a VAT of sufficient but reasonable size.

    Notes: Coauthored with Christian Saborowski. | Published [Excel Tool]


International Development

  • Institutions, Education, and Economic Performance   Adobe Acrobat Required

    Abstract: This paper considers the interactions between governance, educational outcomes, and economic performance. More specifically, we seek to establish the linkages by which institutional quality affect growth by considering its mediating impact on education. While the contribution of both human capital and institutions to growth are often acknowledged, the channels by which institutions affect human capital and, in turn, growth, has been relatively underexplored. Our empirical approach adopts a two-stage strategy that estimates national-level educational production functions which include institutional governance as a covariate, and uses these estimates as instruments for human capital in cross-country growth regressions.

    Notes: Coauthored with Jon Adams-Kane. | Foils

  • China's SME Development   Adobe Acrobat Required

    Abstract: With deregulation and globalization, and the direct impact of these developments on economies worldwide, it is necessary for the Chinese authorities to consider an approach that would further attune its economic engine toward sustained growth. This paper argues that certain industries---in particular, the small and medium enterprise (SME) sector---may play a significant role in terms of any further reforms of China's National Innovation System. It highlights how issues such as innovation, R\&D, and strategic clustering may influence the SME sector, and outlines both internal as well as external conditions that may impact any further development of this sector.

    Notes: Coauthored with Toshiki Kanamori and Tracy Yang. | Brief | Working Paper | Published

  • Taming the Hydra   Adobe Acrobat Required

    Abstract: The information and communications technology (ICT) revolution began in the early 1990s and has swept the world, the Asia Pacific included. However, recent developments, such as the downturn of the global economic cycle and the onset of global recession led by the world’s three largest economies of the United States, Japan and Germany has led many to reconsider the resilience of the ICT revolution. This paper will address the manifold impacts of ICT, and in particular, its impact on economies and societies in the Asia Pacific region. This is no small task, but the paper will endeavour to provide a broad overview, coupled with critique and analysis, of the various economic, political, and sociological consequences of this revolution.

    Notes: Coauthored with Yap Ching Wi. Ultimately published under the title "Digital Dreams and Divergent Regimes".

  • East Asia in the New Economy   Adobe Acrobat Required

    Abstract: This essay does seeks provide a balanced perspective on its opportunities and challenges facing East Asia with regard to the New Economy. It finds that although these countries differ in their levels of development in the New Economy, the prospect of growth in this area will depend on the policies that they choose to pursue. Economic issues considered include the potential for productivity gains from ICT, gains from networking and improved information flows, establishing competitive advantage through human capital and institution building, and the widening digital divide.

    Notes: This is a policy essay written for a broad audience. | Published

  • Singapore's Role as ICT Hub: View from the New Economic Geography   Adobe Acrobat Required

    Abstract: This paper examines the aspirations of Singapore to be an ICT hub in ASEAN using the concepts developed in the field of the New Economic Geography. It sets out three models for this study that examines the impact of increased economic integration on the changing role of Singapore as a hub; it then applies these models to the study of the ICT goods industry, ICT services industry and ICT infrastructure. Included is a discussion of recent ICT policy in Singapore, and implications of the theory on future policy options for countries in the region. The conclusion is that, when the constant evolution of the economic landscape is seen in the light of necessary private agent choices, a hub role is both sustainable and beneficial to the continued growth and development of the region.

    Notes: A modified version appears in a conference volume. | Published

  • The Challenges of IT in Asia   Adobe Acrobat Required

    Abstract: This paper addresses the context of IT development in East and Southeast Asia by looking at various case studies.

    Notes: This is the introductory chapter to the co-edited IT in Asia volume. | Published

  • Singapore's ICT Policies for the New Millennium: Implications for SMEs   Adobe Acrobat Required

    Abstract: This paper outlines the ICT policies in Singapore and draws implications of those plans for small and medium enterprises in Singapore. While a large literature exists on ICT policy in Singapore, only anecdotal evidence is available on how these policies affect SMEs. This paper utilizes an economic framework for the discussion and analysis of these policies, and concludes the future ICT policy will need to be more broad-based and flexible, in order to prevent severe market distortions from arising.

    Notes: My first working paper produced at ISEAS. Unpublished.


Comparative Political Economy

  • Going Nuclear   Adobe Acrobat Required

    Abstract: The prominence of several ``big picture'' issues---such as global warming, energy security, and an energy economy---has meant that countries are beginning to seriously consider adopting nuclear technology as a source for energy. This trend has implications with regard to the proliferation of nuclear weapons, especially in places such as the Middle East and the Korean Peninsula. This paper aims to develop a model of country decisionmaking that takes into account the game-theoretic considerations involved in the production of weapons versus energy, especially in the presence of a player that has already acquired weapons. It finds that, while economic considerations can potentially offset the desire to acquire nuclear weapons acquisition, the presence of a nuclear-armed neighbor will lead to a race-to-the-bottom outcome where countries find it in their interest to proliferate. Policy implications of the analysis are also considered.

    Notes: Prepared for CSIS's PONI Nuclear Scholars Initiative. | Published

  • Sticks and Carrots   Adobe Acrobat Required

    Abstract: In this note, we introduce two distinct incentive mechanisms that support dynamic intra-group cooperation in the context of prisoner's dilemma payoffs. The first mechanism involves a reward for cooperating, where the rewarding party may be outside a given relationship. The second mechanism involves a punishment for defection, where the punishing party may be outside the relationship. We also discuss how these mechanisms are relevant in real-world groups such as criminal gangs and military platoons.

    Notes: Coauthored with Thorsten Janus. | Published

  • Atoms for Peace, Redux   Adobe Acrobat Required

    Abstract: The likelihood that North Korea possesses nuclear weapons is a clear and present danger to sustained stability in the Korean peninsula. Unfortunately, the traditional notion of ``Atoms for Peace'' has been a failure in the engagement of the North. In this paper we propose a novel approach to mutual cooperation in energy provision in the Korean peninsula, premised on having North Korea host reactors that deliver energy to South Korea. We establish conditions where there exists a stable, time-consistent equilibrium where the North never finds it in its interest to disrupt energy supplies to the South, and where the South is willing to pay the fixed costs of nuclear plant construction, in exchange for a discounted stream of energy supply from the North.

    Notes: Coauthored with Kyle Beardsley. | Online Appendix | Brief | Poster

  • Recognition, Redistribution, and Liberty   Adobe Acrobat Required

    Abstract: This paper examines the relationship between redistribution, recognition, and liberty. In particular, it critiques the arguments made by authors such as Fraser & Honneth (2003) about how redistribution is a simple subset of recognition, and how recognition is both necessary and sufficient for redistribution to occur. It argues, instead, that it is the relatively weak assumption of (minimal) individual liberty that allows recognition (and hence redistribution) to exist, and that while recognition is necessary, it is insufficient for redistribution, if liberty is to be respected. Finally, it shows that this approach is, ultimately, a more robust and sustainable strategy to understanding the problems posed by discrimination and social inequality.

    Notes: Coauthored with Anne Collins. | Foils | Published

  • Toward a Theory of the Modern State   Adobe Acrobat Required

    Abstract: This paper seeks to make a case for a theory of the modern state that is premised on the constituents of the state: Its citizens. The central argument is that the chimera that has been termed the ``state'' is, in effect, primarily an institutional structure that constrains the actions and behavior of the agents that make up its core. While not dismissing the existence of the idea of a state in terms of rhetoric, conceptualization, and practice, we argue that the entity is best understood as a dispassionate, neutral institution that is shaped by both domestic and international events and pressures, through its citizen-agents. The paper begins with a critique of the existing approaches to establishing a theory of the modern state, followed by a review of common rebuttals; it goes on to sketch the theoretical framework that is the core of the paper. We argue that this approach, which allows for the state to be endogenous in its formation and change, while not possessing any imbued characteristics of its own, is a more attractive approach to understanding the modern state.

    Notes: Under preparation. | Foils

  • Role of State in a Borderless World   Adobe Acrobat Required

    Abstract: Modern theories of relations between states seem to advocate polarized worlds, where nations are either headed toward inter-civilizational clashes or liberal-democratic uniformity. Similarly, theories of globalization posit either hyperglobalization or more state-centric scenarios. While it is unlikely that such extremities are realistic, states would need to remain relevant by adopting policies that understand and embrace these tensions in a globalized world. This essay seeks to formulate a framework for understanding the role of the state in a world where borders are becoming increasingly transparent. In doing so, it adopts a multidisciplinary perspective, drawing from research in international economics, global politics, and sociology. It links theory to application by arguing that the role of the state is to address each of these rationales for state formation, in the context of globalization. As traditional rationales for state formation and existence are rapidly being redefined, states need to adapt to these altered circumstances. This essay shows that there exist policy options that would allow the state to play a central role in this transition.

    Notes: An extended policy essay. | Published

  • Jesus versus Jihad   Adobe Acrobat Required

    Abstract: At the turn of the century, Indonesia was at the forefront of international attention, due to its multi-dimensional conflicts from Aceh in the west to Irian Jaya in the east that threatened to tear the nation, already stricken by economic crisis, apart. This paper seeks to critically examine the various economic, social, and political aspects of Indonesia that have led to the sectarian conflict in various parts of the archipelago, which threatened the very integrity of the Indonesian republic.

    Notes: An extensive case study, using primary sources and the academic literature. | Published

  • Between Petrograd and Seattle   Adobe Acrobat Required

    Abstract: The recent backlash against globalization is but a reminder of the persistence of socialist and neomarxist ideology, despite its intellectual and practical bankruptcy. This essay reexamines this phenomenon, and argues that this is no paradox, but merely a continuation of a long intellectual tradition, reintroduced by historical circumstance, and reinforced by a confluence of reasons that renders it relevant in modern day context. In particular, these reasons include the perception of the seeming unsustainability of capitalist expansion, an erroneous interpretation of world income distribution, and the intellectual synergy between socialist/neomarxist and postmodern theory. It concludes by drawing some implications that arise from the analysis, as it pertains to the future of ongoing debate in the field.


Reviews - Books & Literature

  • Building the World, A Piece at a Time

    Book review of Toward a New International Financial Architecture: A Practical Post Asia Agenda, by Barry Eichengreen. | Published

  • Dimensions of Regional Trade Integration in Southeast Asia: Review

    Book review of The Dimensions of Regional Trade Integration in Southeast Asia, by Mohammed Zakirul. | Published

  • Introductory Graduate Macro Texts

    Book reviews, from a student's perspective, of six key texts used for the first-year macro sequence for economics doctoral programs.

  • International Economics Network

    Website review of The International Economics Network. | Proof

  • Fun, Games & Economics

    Abstract: Game theory has had a profound influence on many fields of the social sciences since its rise to prominence more than fifty years ago. This paper provides an overview of the main concepts in game theory and studies four main areas of its application in economic problems – oligopolistic competition, externalities & public goods, market equilibrium and general equilibrium. The conclusion is that game theory has found a natural place in economics and will continue to contribute to it for many years to come.

    Notes: My first publication, in an undergraduate journal. | Published


All material on these pages, unless otherwise stated, are copyright © 1996--2010 Jamus Jerome Lim. Please do not reproduce without permission. Downloads of published papers are for personal use only, and the copyright holder should be contacted for permission to make multiple copies.