Crisis, Complexity and Conflict, Volume 9

200 Pages·2009·2.29 MB·English

by  M. Brzoska

CRISIS, COMPLEXITY
AND CONFLICT
Contributions to
Conflict Management, Peace Economics
and Development Volume 9
SERIES EDITOR
MANAS CHATTERJI
BOOKS IN THE SERIES
Eurasia: A New Peace Agenda, edited by M. D. Intriligator
Cultural Differences between the Military and Parent Society in Democratic Countries,
edited by G. Caforio
Managing Conflict in Economic Convergence of Regions in Greater Europe, edited by
F. Carluer
MilitaryMissionsandTheirImplicationsReconsidered:TheAftermathofSeptember11th,
edited by G. Caforio and G. Kuemmel
Conflict and Peace in South Asia, edited by M. Chatterji and B. M. Jain
War, Peace, and Security, edited by Jacques Fontanel and Manas Chatterji
Armed Forces and Conflict Resolution, edited by G. Caforio, G. Kümmel and
B. Purkayastha
Regional Development and Conflict Management: A Case for Brazil, by Raphael Bar-El
Crisis, Complexity and Conflict, by I. J. Azis
Putting Teeth in the Tiger: Improving the Effectiveness of Arms Embargoes, edited by
Michael Brzoska and George A. Lopez (Forthcoming)
Peace Science: Theory and Cases, by P. Gangopadhyay and M. Chatterji
(Forthcoming)
Advances in Military Sociology: Essays in Honor of Charles C. Moskos (Two Volume Set),
edited by Giuseppe Caforio (Forthcoming)
Contributions to
Conflict Management, Peace Economics
and Development volume 9
CRISIS, COMPLEXITY
AND CONFLICT
IWAN J. AZIS
Regional Science, and Johnson Graduate School of Management,
Cornell University, USA
United Kingdom – North America – Japan
India – Malaysia – China
Emerald Group Publishing Limited
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First edition 2009
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ISBN: 978-1-84855-204-3
ISSN: 1572-8323 (Series)
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CONTENTS
LIST OF FIGURES vii
LIST OF TABLES xi
FOREWORD xiii
PREFACE xv
ACKNOWLEDGMENT xvii
CHAPTER 1 INTRODUCTION 1
CHAPTER 2 GLOBAL IMBALANCES 5
CHAPTER 3 FINANCIAL CRISIS 25
CHAPTER 4 REGIONAL FINANCIAL
ARRANGEMENT 55
CHAPTER 5 OIL PRICE INCREASE 99
CHAPTER 6 MITIGATING CLIMATE CHANGE 155
v
vi CONTENTS
CHAPTER 7 LESSONS AND CONCLUSIONS 173
REFERENCES 187
INDEX 191
LIST OF FIGURES
Figure 2.1 Current Account Balances (Percentage of GDP) . . . . . . 6
Figure 2.2 U.S. Deficit (Inverted Sign) and Oil Producers
Surplus of Current Account . . . . . . . . . . . . . . . . . . . . . 7
Figure 2.3 Current Account Balance, Saving and Investment:
Industrial Countries . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 2.4 Current Account Balance, Saving and Investment:
Emerging Markets and Oil Producing Economies. . . . . . 9
Figure 2.5 Effect of Rising Imports . . . . . . . . . . . . . . . . . . . . . . 20
Figure 2.6 Effect of Higher Preference Towards U.S. Assets . . . . . 21
Figure 3.1 USFinancialSector’sInvestmentinFinancialAssets. . . 30
Figure 3.2 Spread between 3–Mo LIBOR and OIS . . . . . . . . . . . 33
Figure 3.3 Trade-off between Dollar Value and Recession . . . . . . 38
Figure 3.4 US Aggregate Supply (AS) and Aggregate Demand
(AD) Slopes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Figure 3.5 SourcesofU.S.OutputGrowthandInflationShocks. . . 42
Figure 3.6 Total Values of M&A Announced by SWF and the
Share Going To Western Financial Institutions . . . . . . 46
Figure 4.1 Impulse Responses to 1 SD Exchange Rate Shock . . . . 59
Figure 4.2 Searching for Preferred Form of RFA: Model
Framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Figure 4.3 SearchingforPreferredFormofRFA:BenefitModel. . . 65
Figure 4.4 Searching for Preferred Form of RFA: Opportunity
Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Figure 4.5 Searching for Preferred Form of RFA: Cost Model . . . 68
Figure 4.6 Searching for Preferred Form of RFA: Risk Model . . . 70
Figure 4.7 Results with Feedback Effects (Network) under
Different BOCR Ratings . . . . . . . . . . . . . . . . . . . . . . 75
Figure 4.8 Results without Feedback Effects (Hierarchy) under
Different BOCR Ratings . . . . . . . . . . . . . . . . . . . . . . 76
Figure 4.9 Sensitivity with Respect to Benefit and Opportunity . . . 76
Figure 4.10 Sensitivity with Respect to Cost and Risk . . . . . . . . . . 77
Figure B1 Hong Kong (China) Dollar . . . . . . . . . . . . . . . . . . . . 86
vii
viii LIST OFFIGURES
Figure B2 Indonesian Rupiah . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Figure B3 Malaysian Ringgit. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Figure B4 Philippines Peso . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Figure B5 Singapore Dollar. . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Figure B6 South Korea Won. . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Figure B7 Taipei (China) Dollar . . . . . . . . . . . . . . . . . . . . . . . . 89
Figure B8 Thai Baht. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Figure C1 Linear Hierarchy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Figure C2 Feedback Network . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Figure C3 Supermatrix of a Hierarchy . . . . . . . . . . . . . . . . . . . . 92
Figure C4 Supermatrix of a Holarchy. . . . . . . . . . . . . . . . . . . . . 92
Figure C5 Supermatrix of a Network . . . . . . . . . . . . . . . . . . . . . 93
Figure C6 Entry in the Supermatrix of a Network. . . . . . . . . . . . 93
Figure 5.1 Average CIF Cost of Imported Crude Oil (IEA
Total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Figure 5.2 How Oil Price Increase Affects Poverty. . . . . . . . . . . 102
Figure 5.3 Real GDP Growth Rates (2003–2006) . . . . . . . . . . . 103
Figure 5.4 Structural Path of Oil-Intensive Rubber–Petroleum–
Plastic Industries in India . . . . . . . . . . . . . . . . . . . . 110
Figure 5.5 Structural Path of Oil-Intensive Transport and
Telecommunication Sector in China . . . . . . . . . . . . . 114
Figure 5.6 Structural Path of Oil-Intensive Transport Sector in
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Figure 5.7 StructuralPathofOil-IntensiveChemicalIndustryin
Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Figure 5.8 India: Kerosene and Diesel Wholesale Price Index . . . 125
Figure 5.9 Domestic Fuel Price Increases in Some Countries . . . 129
Figure A1 Global Influence: All Elementary Paths and Circuits
Linking i and j . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Figure D1 ChinaImpulseResponse:FuelSubsidy-FuelPrice
- Interest Rate - Inflation - Poverty Line . . . . . . 135
Figure D2 China Impulse Response: Fuel Subsidy - Kerosene
Price - Interest Rate - Inflation - Poverty Line . . 136
Figure D3 ChinaImpulseResponse:FuelSubsidy-FuelPrice
- Manufacturing - Agriculture - Rural Poor. . . . 136
Figure D4 ChinaImpulseResponse:FuelSubsidy-FuelPrice
- Manufacturing - Agriculture - Urban Poor . . . 137
Figure D5 China Impulse Response: Fuel Subsidy - Kerosene
Price - Manufacturing - Agriculture - Rural
Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
List ofFigures ix
Figure D6 China Impulse Response: Fuel Subsidy - Kerosene
Price - Manufacturing - Agriculture - Urban
Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Figure D7 ChinaImpulseResponse:FuelSubsidy-FuelPrice
- SOC - Rural Poor . . . . . . . . . . . . . . . . . . . . . . 138
Figure D8 China Impulse Response: Fuel Subsidy - Kerosene
Price - SOC - Rural Poor . . . . . . . . . . . . . . . . . . 139
Figure D9 India Impulse Response: Fuel Subsidy - Kerosene
Price - Interest Rate - Inflation - Poverty Line . . 139
Figure D10 India Impulse Response: Fuel Subsidy - Diesel
Price - Interest Rate - Inflation - Poverty Line . . 140
Figure D11 India Impulse Response: Fuel Subsidy - Kerosene
Price - GDP - Rural Poor. . . . . . . . . . . . . . . . . . 140
Figure D12 India Impulse Response: Fuel Subsidy - Diesel
Price - GDP - Rural Poor. . . . . . . . . . . . . . . . . . 141
Figure D13 India Impulse Response: Fuel Subsidy - Kerosene
Price - Services - Rural Poor. . . . . . . . . . . . . . . . 141
Figure D14 India Impulse Response: Fuel Subsidy - Kerosene
Price - Services - Urban Poor . . . . . . . . . . . . . . . 142
Figure D15 India Impulse Response: Fuel Subsidy - Diesel
Price - Services - Rural Poor. . . . . . . . . . . . . . . . 142
Figure D16 India Impulse Response: Fuel Subsidy - Diesel
Price - Services - Urban Poor . . . . . . . . . . . . . . . 143
Figure D17 Korea Impulse Response: Diesel Price - SOC -
Poor Households . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Figure D18 Korea Impulse Response: Gasoline Price - SOC -
Poor Households . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Figure D19 Korea Impulse Response: Diesel Price - Interest
Rates - Inflation - Poverty Line. . . . . . . . . . . . . . 144
Figure D20 Korea Impulse Response: Gasoline Price - Interest
Rates - Inflation - Poverty Line. . . . . . . . . . . . . . 145
Figure D21 Korea Impulse Response: Gasoline Price -
Manufacturing - Agriculture - Poor Households . . 145
Figure D22 Korea Impulse Response: Gasoline Price -
Manufacturing - Agriculture - Poor Households . . 146
Figure D23 Thailand Impulse Response: Fuel Subsidy -
Kerosene Price - Interest Rates - Inflation -
Poverty Line. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Figure D24 Thailand Impulse Response: Fuel Subsidy - Diesel
Price-Interest Rates-Inflation-PovertyLine . . 147