Three essays on the dynamics of international finance in Southeast Asia (Indonesia, Philippines, Singapore, Malaysia, Thailand)

This dissertation is an empirical study on the dynamics of international finance in major Southeast Asian countries. The dissertation is comprised of three essays. The first essay estimates exchange rate pass-through into import prices in Indonesia, the Philippines, Singapore, and Thailand during the period from 1974 to 2000. The estimation results show that among the four countries only Singapore had incomplete exchange rate pass-through; the other three countries had complete exchange rate pass-through. The degrees of exchange rate pass-through in Southeast Asian countries did not differ systematically from the degrees of exchange rate pass-through estimated in a sample of industrialized countries. Factors that seem to be contributing to the variation of exchange rate pass-through across countries are differential inflation rates, money growth, and the presence of MNCs together with intra-firm trade.; In the second essay, using daily data from major Southeast Asian countries during the period from January 1995 to December 2003, we test the hypothesis that domestic interest rates in an economy under a more flexible exchange rate regime are less connected to international financial markets. The sample of countries consists of Indonesia, Malaysia, the Philippines, Singapore, and Thailand. The estimation results show that exchange rate regimes do not have clear-cut implications for the transmission of shocks in international financial markets into domestic interest rates in major Southeast Asian countries. Regardless of the exchange rate regimes, domestic factors seem to be the main forces driving the movements in their domestic interest rates.; Finally, in the third essay we investigate the balance-sheet effects of exchange rate depreciation in Indonesian commercial banks during the period from January 1995 to December 1999. This included the period of the Asian crisis during which the Indonesian currency depreciated by about 75 percent in nominal terms or 25 percent in real terms. The estimation results show that due to a higher amount of foreign currency assets relative to the amount of foreign currency liabilities, exchange rate depreciation results in a lower probability of bank failures. Through reduced profit on lending in foreign currency, exchange rate depreciation results in a higher probability of bank failures.