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This paper empirically examines the relative importance of different sources of inflation in developing Asia. In particular, it tests the widely held view that the region's current inflation surge is primarily the result of external price shocks such as oil and food shocks. In addition, this paper also estimates the degree of pass-through of external price shocks to domestic prices. Our central empirical result is that contrary to popular misconception, Asia's inflation is largely due to excess aggregate demand and inflation expectations rather than external price shocks. This suggests monetary policy will remain a powerful tool in the fight against inflation in Asia. Another significant finding is that the pass-through of the external price shocks to domestic prices has been limited so far. However, the removal of government subsidies is likely to lead to greater pass-through in the future. The resulting inflationary pressures provide a further rationale for tightening monetary policy.

Intro -- Contents -- 1 Deregulation and Development in Indonesia: An Introductory Overview -- 2 The Evolution of Economic Policy Reform: Determinants, Sequencing and Reasons for Success -- 3 Foreign Investment Policy: Evolution and Characteristics -- 4 Deregulation and Total Factor Productivity: 1985-1992 -- 5 The Determinants of Indonesia's Non-Oil Exports -- 6 The Impact of Deregulation on the Manufacturing Sector -- 7 The Impact of Deregulation on Employment and Earnings -- 8 Sulawesi's Cocoa Boom: Lessons of Smallholder Dynamism and Hands-off Policy -- 9 Costs and Benefits of Soymeal Deregulation -- 10 The Indonesian Cement Industry: A Case for Modified Regulation -- 11 Distributional Impact of Government Policies in the Sugar Sector -- 12 The Impact of Regional Trade Deregulation on Selected APEC Countries and Indonesia -- 13 Economic Reforms During the Crisis and Beyond -- Index -- About the Editors and Contributors.

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This paper seeks to explore the basis for a free trade agreement (FTA) between Japan and the Republic of Korea by comparing export patterns of these two countries with that of a nonmember—Taiwan—that is geographically close and is also a major exporter of machinery. After calculating indices of revealed comparative advantage (RCA) for 3‐digit SITC categories, we test for convergence of export patterns between each pairing of partners (Japan‐Korea, Korea‐Taiwan, and Japan‐Taiwan). We find that even though each partner has a statistically significant correlation of RCA indices, export patterns of Korea and Taiwan are converging with that of Japan, while in the case of Taiwan and Korea there is no significant convergence between their export patterns. Finally, we identify sectors where trade diversion is likely to occur and provide an upper‐bound estimate of the potential amount of trade that might be diverted from Taiwan by a Japan‐Korea FTA.

This paper seeks to explore the basis for a free trade agreement (FTA) between Japan and the Republic of Korea by comparing export patterns of these two countries with that of a nonmember---Taiwan---that is geographically close and is also a major exporter of machinery. After calculating indices of revealed comparative advantage (RCA) for 3-digit SITC categories, we test for convergence of export patterns between each pairing of partners (Japan-Korea, Korea-Taiwan, and Japan-Taiwan). We find that even though each partner has a statistically significant correlation of RCA indices, export patterns of Korea and Taiwan are converging with that of Japan, while in the case of Taiwan and Korea there is no significant convergence between their export patterns. Finally, we identify sectors where trade diversion is likely to occur and provide an upper-bound estimate of the potential amount of trade that might be diverted from Taiwan by a Japan-Korea FTA. (Dev Econ/DÜI)