1

In this issue
Professor Naoyuki Yoshino Named
New Dean of ADBI 1
Capital Market Reform in Asia 2
Connecting Central Asia with
Economic Centers 2
Labor Migration in Asia: Building
Human Capital across Borders 3
Promoting Regional Cooperation and
Integration in Asia 3
Exiting from Quantitative Easing 4
Role of Microfinance Programs in Promoting
Financial Inclusion in India and Pakistan 4
Trade Gravity for Economies in Transition 4
Financial Liberalization, Allocation
Efficiency, and Financial Stability 5
The New Landscape of
Trade Policy in Asia and the Pacific 5
The Source of Financial Crisis 5
Recent Publications 6
Selected Upcoming Events 7
Recent Working Papers 7
Strategies for Maintaining Fiscal
Soundness in Aging Societies 8
ADBI News
www. adbi . org 2014 Volume 8 Number 1
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
Professor Naoyuki Yoshino Named New Dean of ADBI
ADBI Dean Naoyuki Yoshino
ADBI is pleased to announce the appointment of
Naoyuki Yoshino as the Institutes new Dean,
effective 1 April 2014. Mr. Yoshino, a Japanese
national, was previously a Professor of Economics
at Keio University. On this appointment, Mr.
Yoshino said, It is an honor to join this important
institute. I look forward to working closely with
partners and colleagues across Asia and the Pacific
to continue ADBIs strong contribution to
economic research and capacity development.
Mr. Yoshino holds a Doctorate degree in
Economics from Johns Hopkins University (US)
and a Bachelors degree in Economics from
Tohoku University (Japan). He also holds honorary
doctorates from Goteborg University (Sweden) and
Martin Luther University Halle-Wittenberg
(Germany). Mr. Yoshino has also been President of
the Financial System Council of the Government
of Japan.
Mr. Yoshino takes over from Masahiro Kawai,
who joined ADBI as Dean in January 2007. During
Mr. Kawais tenure, ADBI solidified its position as
a premier policy-oriented think tank in the Asia
and Pacific region on development issues,
particularly those related to regional cooperation
and integration. ADBI is now ranked as the 5th
best government-affiliated think tank globally,
according to the University of Pennsylvanias
annual Global Go-To Think Tank Index report. Q
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
2
ADBI held a workshop on 10 March on the draft
study Connecting Central Asia with Economic
Centers, which noted that the regions economic
ties have diversified and additional policy reforms
and the building of cross-border infrastructure will
further this trend. Research Director Ganeshan
Wignaraja gave the opening remarks and ADBI
Research Fellow Yothin Jinjarak presented a
macroeconomic overview and trade linkages of
Central Asia.
The workshop discussions focused on the role
of economic relationships, in terms of trade ties,
foreign direct investment linkages, financial flows,
and institutional cooperation, between the Central
Asia republics and global economic centers,
including Asia, the EU, Russia, and the US, that
have expanded since the 1990s. Participants also
explored issues around resource complementarities,
demand conditions and regional cooperation
initiatives, and their influences on trade and
investment flows between the Central Asian region
and the economic centers that have increased
markedly over the recent years. Q
What are the challenges and risks facing Asian
capital markets as the global financial system
transitions toward greater financial stability? To
answer these crucial questions, ADBI and OECD
held the 14th Roundtable on Capital Market
Reform in Asia on 1314 March. The roundtable
reviewed developments in capital markets and
assessed their implications on capital market
development and integration in Asia. It also
discussed issues on long-term investment for
infrastructure development, the role of capital
markets in disaster risk financing, and the need for
innovative financing in promoting sound,
well-functioning, and inclusive finance in Asia.
The roundtable focused on the following issues:
(i) implication of quantitative easing tapering to
Asia; (ii) global financial regulatory reforms
progress, implementation challenges, and
consequences; (iii) financial liberalization in the
de-globalization phase; (iv) long-term investment
for infrastructure development; (v) innovation for
financial inclusion for households and small and
medium-sized enterprises; and (vi) disaster risk
financing and the evolving role of insurance and
financial markets. Q
Connecting Central Asia with
Economic Centers
WORKSHOP
For more information on this roundtable, please visit:
www.adbi.org/event/6177.adbi.oecd.14th.roundtable/.
Capital Market Reform in Asia ROUNDTABLE
ADBI Research Fellow Victor Pontines pointed out that
based on initial empirical calculations, the macroeconomic
impact of Basel III capital adequacy rules appears unlikely to
have a major negative impact on four ASEAN economies, i.e.,
Indonesia, Malaysia, Philippines, and Thailand.
For more information on this workshop, please visit:
www.adbi.org/event/6196.connecting.central.asia.economic.
centers/.
ADBI Research Fellow Yothin Jinjarak and ADBI Research
Director Ganeshan Wignaraja discuss policy reforms aimed
at strengthening Central Asias economic ties with global
economic centers.
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
3
For more information on this roundtable, please visit:
www.adbi.org/event/6093.4th.roundtable.labor.migration.asia/.
Labor Migration in Asia:
Building Human Capital across Borders
ROUNDTABLE
Asia is the worlds most economically dynamic
region, and is home to more than 30 million
migrant workers. In countries of destination for
migrants, the structure of economies, relative labor
shortages, and demographic changes are key
factors driving the demand for workers. The 4th
ADBI-OECD-ILO Roundtable on Labor
Migration in Asia: Building Human Capital
across Borders was held at ADBI on 2728
January to better understand labor migration trends
and labor migration management, and to also
promote international cooperation in labor
migration markets.
Migrant workers make an enormous
development contribution to the regions
economies. In the countries of destination, workers
improve services and the competitiveness of the
economy through additions in skills and labor
power. For their countries of origin, migrant
workers provide financial remittances, improved
skills, and knowledge on their return. Despite this,
many migrant workers are subject to labor
exploitation and abuse and studies of recruitment
processes and working conditions for low-skilled
migrants consistently reveal abuses commonly
associated with labor exploitation.
The roundtable outputs included an assessment
of labor market requirements for foreign workers,
as well as a better understanding of the
international experiences in building a mobility
area for skills, which will help to construct a free
flow of skilled labor among ASEAN member
countries by 2015 as its approved objective. Q
For more information on this conference, please visit:
www.adbi.org/event/6081.regional.cooperation.integration/.
Promoting Regional Cooperation and
Integration in Asia
CONFERENCE
Regional cooperation and integration (RCI) is an
important avenue for fostering rapid and sustained
growth, reducing poverty, and building resilient
institutions. Through RCI, countries build closer
trade, investment, and financial links that, in turn,
create opportunities for mutual, broad-based, and
inclusive growth, especially among developing
economies. To take stock of the progress of and
outlook for RCI in Asia and the Pacific, ADBI held
the conference Promoting Regional Cooperation
and Integration in Asia on 25 February.
Recognizing the importance of RCI in the
regions growth and development, ADBI has
identified RCI as a key research theme. Under this
theme, several studies have been undertaken to
support the Asian Development Banks (ADB)
mandate of promoting regional cooperation in the
Asia and Pacific region. Great progress has been
achieved in RCI since it was formally adopted by
ADB as part of its mandates in 1994. However,
much work needs to be done to link member
countries to regional priorities. Q
In his keynote speech, James A. Mirrlees, the winner of the
1996 Nobel Memorial Prize in Economic Sciences, spoke on
the human capital implications of international migration.
Former ADBI Dean Masahiro Kawai stressed in his
welcoming remarks that by working together Asian countries
can better unlock their vast economic potential.
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
4
For more information on this seminar, please visit:
www.adbi.org/event/6051.role.microfinance.programs.
financial.inclusion/.
For more information on this seminar, please visit:
www.adbi.org/event/5896.trade.gravity.economies.transition/.
Exiting from Quantitative Easing
At a seminar at ADBI on 21 January, University of
Tokyo Professor Junko Koeda presented results of
an econometric model that describes the Bank of
Japans monetary policy and its impacts on output
and inflation. The model includes endogenous
regime switching between a normal policy regime
based on the Taylor Rule for the policy interest
rate, and a zero-interest-rate regime using
quantitative easing. Applying this model to Japan,
the impulse response analysis yields two findings
about quantitative easing. First, an increase in
reserves raises inflation and output. Second,
terminating the quantitative easing regime can be
expansionary. Q
Savita Shankar, a research fellow at the Asian
Institute of Management, presented findings from
two field studies on the role of microfinance
programs in promoting financial inclusion in India
and Pakistan at ADBI on 13 February. Using a
framework based on the financial inclusion
literature, primary data was collected on programs
in the two countries. The graduation of group
microcredit members to individual loans was also
examined as it could be an important step toward
long-term access to financial services. Policy
implications arising from the findings were also
presented. Q
SEMINAR
Role of Microfinance Programs in Promoting
Financial Inclusion in India and Pakistan
SEMINAR
Trade Gravity for Economies in Transition SEMINAR
At an ADBI seminar on 10 January, Research
Fellow Yothin Jinjarak presented new empirical
evidence on international trade, focusing on a
time-varying role of distance on trade between
transition economies in Asia and the rest of the
world. He highlighted the role of comparative
advantage, technology, and factor proportions, and
argued that further trade integration would be
beneficial for transitional economies in Asia. Q
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
5
For more information on this seminar, please visit:
www.adbi.org/event/6171.aliber.distinguished.speaker/.
For more information on this seminar, please visit:
www.adbi.org/event/6113.park.distinguished.speaker/.
Financial Liberalization, Allocation
Efficiency, and Financial Stability
DISTINGUISHED SPEAKER
Yung Chul Park,
a distinguished
professor in the
division of
international studies,
Korea University,
presented new
evidence at an
ADBI seminar on
30 January on
the relationship
between financial
market deregulation and efficiency of loan
allocation. For the Republic of Korea, there is little
evidence that financial market deregulation and
opening has helped improve the efficiency of loan
allocation at banks and other non-bank financial
institutions. Despite financial reform, large firms
and industries have been unable to improve their
total factor productivity. Greater exchange rate
flexibility in the Republic of Korea since 1998 has
not contributed to moderating capital inflows and
thus to sustaining domestic financial stability. The
reason seems to be that portfolio equity flows,
which are the dominant capital inflows, are not
sensitive to exchange rate fluctuations. Q
For more information on this seminar, please visit:
www.adbi.org/event/6117.petri.distinguished.speaker/.
The New Landscape of Trade
Policy in Asia and the Pacific
DISTINGUISHED SPEAKER
The Source of Financial Crisis
DISTINGUISHED SPEAKER
Peter A. Petri, the Carl J. Shapiro Professor of
International Finance at the Brandeis International
Business School, gave a seminar at ADBI on 19
February titled The New Landscape of Trade
Policy in Asia and the Pacific: TPP, RCEP, and
More. Professor Petri explored the outlook and
gains for a Regional Comprehensive Economic
Partnership (RCEP), Trans-Pacific Partnership
(TPP), and Transatlantic Trade and Investment
Partnership (TTIP). TPP matters greatly, he pointed
out, because it aims to establish the most advanced
rules for trade and
investment and is
scheduled to
conclude ahead of
the other proposed
trade deals. Q
Robert Aliber, a
professor at the
Chicago Booth
School of Business
at the University of
Chicago, on 18
March presented
insights from his
new book on
financial crises.
The last three
decades saw four waves of financial crisis in 1982,
1990, 1997, and 2008. Each wave was preceded by
an economic boom and investment inflow that
resulted in the rise of currency and securities prices
and an increase in household wealth. Furthermore,
the crises of recent decades have been
characterized by a currency crisis associated with a
banking crisis. Financial crisesthe boom and
bust cyclesare costly. There is much wasteful
consumption and investment expenditure during
booms and the waste of underemployed resources
during busts. Q
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
6
Recent Publications
Labor Migration, Skills, and Student Mobility in Asia
The Political Economy of Asian Regionalism
This book contributes to the theoretical and
empirical literature on Asian regionalism, with a
focus on the innovations needed to reform the
current institutional architecture in Asia. After
reviewing the key issues and challenges related to
the political economy of Asias economic
cooperation and integration, the book discusses
various aspects of regionalism from political and
economic perspectives. It looks at the rationale for
regional collective action and reviews the trend of
economic integration with a focus on the
implications of the global financial crisis.
This book also analyzes
issues such as trade and finance
and deals with the implications
of regionalism in terms of the
introduction of domestic
reforms in Asian countries
before discussing the possible
formation of a region-wide
economic community. Q
This report is a summary of
the major policy issues
raised at discussions among
experts and practitioners
from various international
organizations and several
Asian countries at the
Third Roundtable on
Labor Migration:
Assessing Labor Market
Requirements for Foreign Workers and Policies
for Regional Skills Mobility, held in Bangkok
from 23 to 25 January 2013. The report highlights
the trends and outlook for labor migration in Asia
and assesses the labor market requirements for
foreign workers. It also focuses on building a
mobility area for skills to help create a free flow
of skilled labor among the Association of
Southeast Asian Nations member states, gaining
from skills portability and links between education
and migration, as well as managing low-skilled
migration and promoting decent work
opportunities for labor migrants. Q
ADBI Climbs Think Tank Rankings
ADBIs ranking among government-affiliated
think tanks rose from 6th to 5th in the 2013
Global Go-To Think Tank Index report, released
22 January by the Think Tanks and Civil
Societies Program of the University of
Pennsylvania. The report is based on an
international survey of scholars, public and
private donors,
policymakers, and
journalists who
evaluated and ranked
more than 6,500 think
tanks worldwide.
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To order this book, please visit:
www.springer.com/economics/regional+science/book/
978-4-431-54567-5.
To download this book, please visit:
www.adbi.org/book/2014/02/25/6179.labor.migration.skills.
student.mobility.asia/.
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
7
18 April
68 May
Asia and Japan: Trading into the Future (Tokyo)
This panel discussion will bring together leading trade experts to discuss the progress of mega-regional trade deals
such as the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP).
Technical Workshop on Financial Regulation Inclusion and Financial Education (Tokyo)
This conference will examine trends in microfinance for individuals and firms in developed and emerging
economies; institutional and regulatory barriers to the expansion of microfinance; the relation of microfinance to
financial stability; and the role of financial education.
Regional Conference on Trade in Value-Added, Global Value Chains, and Development Strategy (Singapore)
The aim of this conference is to analyze the roles of trade in value added and global value chains in innovation,
industrialization, international trade, and economic development.
Selected Upcoming Events
Recent Working Papers
Issues for Renminbi Internationalization: An Overview
Authors: Barry Eichengreen and Masahiro Kawai
This paper provides an overview of the potential international role of
the renminbi (RMB). Reviewing the current state, the paper finds that
much progress has been made on RMB settlements for trade involving
the Peoples Republic of China (PRC) and on RMB-denominated bond
issuance in Hong Kong, China, but that RMB internationalization is
still limited due to capital account controls. It argues that a high degree
of RMB internationalization requires significant capital account
liberalization, which in turn would call for greater exchange rate
flexibility so that the central bank can enjoy monetary policy autonomy.
Read Working Paper 454 at www.adbi.org/working-paper/
2014/01/20/6112.issues.renminbi.internationalization.overview/.
The Peoples Republic of Chinas Growth, Stability,
and Use of International Reserves
Authors: Joshua Aizenman, Yothin Jinjarak, and Nancy P.
Marion
In the run-up to the 2008 global financial crisis, the world economy was
characterized by large and growing current account imbalances. Since
the onset of the crisis, the Peoples Republic of China (PRC) and the
United States have rebalanced. As a share of gross domestic product,
their current account imbalances are now less than half their pre-crisis
levels. For the PRC, the reduction in its current account surplus
post-crisis suggests a structural change. Panel regressions for a sample
of almost 100 economies over the thirty-year period, 19832013,
confirm that the relationship between current account balances and
economic variables such as performance, structure, wealth, and the
exchange rate, changed in important ways after the financial crisis.
Read Working Paper 455 at www.adbi.org/working-paper/
2014/01/24/6114.prc.growth.stability.international.reserves/.
Determinants of the Trilemma Policy Combination
Authors: Hiro Ito and Masahiro Kawai
This paper presents a theoretical framework for policy making based
on the impossible trinity or the trilemma hypothesis. A simple
optimization model shows that placing more weight in terms of
preference for each of the three open macroeconomic policies
exchange rate stability, financial market openness, and monetary
policy independencecontributes to a higher level of achievement in
that particular policy. The paper goes on to develop the first empirical
framework in the literature to investigate the joint determination of the
triad open macroeconomic policies based on the trilemma hypothesis.
Read Working Paper 456 at www.adbi.org/working-paper/
2014/01/30/6128.determinants.trilemma.policy.combination/.
Regional Financial Regulation in Asia
Authors: Masahiro Kawai and Peter J. Morgan
The Asian financial crisis (19971998) and the global financial crisis
(20072009) highlighted the potential value of financial regionalism, i.e.,
regional-level cooperation in financial policy. This paper argues that there
is a mediating role for regional-level institutions of financial regulation
between national regulators in Asia and global-level institutions such as
the International Monetary Fund and the Financial Stability Board. This
potential role includes: (i) monitoring financial markets and capital flows
to identify regional systemic risks such as capital flows; (ii) coordinating
financial sector surveillance and regulation to promote regional financial
stability; and (iii) cooperating with global-level institutions in rule
formulation, surveillance, and crisis management.
Read Working Paper 460 at www.adbi.org/working-paper/
2014/02/12/6134.regional.financial.regulation.asia/.
Assessing the Experience of South Asia-East Asia
Integration and Indias Role
Author: Ganeshan Wignaraja
This paper examines the gains for South Asian economies from
integrating with East Asia and Indias role in this process. Evidence of
increased pan-Asian integration exists but the process is uneven.
Bilateral trade has grown, as have bilateral foreign direct investment
flows and free trade agreements (FTAs), albeit at a slower pace than
trade. The integration process has been led by India and Pakistan with
limited participation of smaller South Asian economies. Tackling key
impediments in cross-border infrastructure, FTAs, trade barriers and
business regulations, and barriers to services will foster further
integration.
Read Working Paper 465 at www.adbi.org/working-paper/
2014/02/25/6180.experience.south.asia.east.asia.integration.india/.
Emerging Economies Supply Shocks and Japans
Price Deflation: International Transmissions in a
Three-Country DSGE Model
Authors: Naohisa Hirakata, Yuto Iwasaki, and Masahiro Kawai
This paper examines the international transmission effects that a positive
supply shock in emerging economies may have on inflation in developed
economies. A three-country dynamic stochastic general equilibrium
model is constructed to analyze the impact of a supply shock in an
emerging economy, the Peoples Republic of China (PRC), on inflation
rates in two developed economies, Japan and the US. The assumed
asymmetric trade structures among the three countries and the PRCs
choice of exchange rate regime appear to influence the international
transmission of a supply shock in the PRC. Specifically, Japan is under a
greater deflationary pressure than the US because of its vertical trade
specialization vis--vis the PRC and the PRCs US-dollar-pegged regime.
Read Working Paper 459 at www.adbi.org/working-paper/
2014/02/07/6133.emerging.economies.supply.shocks/.
23 April
A s i a n D e v e l o p m e n t B a n k I n s t i t u t e
8
Strategies for Maintaining Fiscal
Soundness in Aging Societies
CONFERENCE
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Publisher: Yasuro Narita
ADBI News
Many Asian economies are
facing a rapid aging of their
populations, which will
raise social expenditures
dramatically and increase the
risks to fiscal sustainability.
To maintain fiscal soundness,
countries need to control
government expenditures,
especially social expenditures
relating to aged people, and
enhance revenues. Therefore,
governments need to assess
the areas they should
prioritize in order to
concentrate limited financial
resources.
To analyze the strategies
for maintaining fiscal
soundness in aging societies,
ADBI held the conference
Strategies for Maintaining Fiscal Soundness in
Aging Societies, in coordination with Policy
Research Institute of the Ministry of Finance,
Japan, on 6 March. The conference examined the
experience of advanced and emerging economies,
with particular reference to Asian emerging
economies. Q
For more information on this conference, please visit:
www.adbi.org/event/6116.strategies.fiscal.soundness.
aging.societies/.
Edward Palmer, a professor at Uppsala University in Sweden; Henrik Braconier, a senior
economist at OECD; and Ganeshan Wignaraja, director of research at ADBI, discuss ways
governments can maintain fiscal soundness in the face of aging populations.
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