"Life Cycle" Hypothesis of Saving: Aggregate ... - Arabictrader.com

314 Miscellanea
discretion is too pervasive and ends up fostering corruption and opportunism
rather than supervision; and insufficient because the legal rule is intentionally left
lacking clarity, completeness, or even more simply, enforcement. We argue that
the regulatory structure is often intentionally maintained in its obtrusive form in
order to perpetuate the ubiquitous involvement of political factions in the government
of the economy. 15 In the context of an ambiguous legal rule, a large proportion
of economic decisions must be negotiated or mediated by political
intervention.
Government policy is crucial along two important lines: in restraining fraudulent
or destabilizing behavior, and in maintaining favorable and reliable conditions
for private transactions. It is usually believed that the former purpose
requires regulation while the latter suggests deregulation. In contrast to this view,
we have argued that legislation aimed at facilitating private transacting must offer
a contained level of regulation together with juridical certainty and impartiality:
some clear and reliable “rules of the game.” Although regulation is a constraint
on private transacting, ultimately an inadequate or underenforced system of regulation
is counterproductive, since it results in uncontrolled “laissez faire” where
there is some benefit at the expense of others. The credibility of the transacting
mechanism therefore collapses, with a general loss of gains from trade.
The Potential for the Development of Asian Security Markets
The arguments laid out in this article of some relevance in evaluating the challenge
facing the emerging stockmarkets of Southeast Asia. These economies have
made great strides on the road to full economic development. The growth of their
economies, and notably that of our host country, Thailand, has been truly astonishing,
not only in comparison with the sluggish developed economies but even
in comparison with the growth rates achieved by Japan in the 60s. In the process,
their security markets have also made great leaps forward. Recent data gathered
by the International Finance Corporation indicates that their Asia Index, which
tracks stocks in Thailand together with Malaysia, South Korea, and Taiwan,
increased 9 1 / 2 times between 1984 and 1989, in comparison with a mere 2 1 / 2 for
the S&P index. Similarly, the increase in the market capitalization of the seven
emerging Asian markets has been an impressive 8 1 / 2 times. This group of
countries shows, moreover, an increase in listings of 40 percent, although for
Thailand the figure is as high as 75 percent.
These developments reflect in part, in our view, the fact that these countries
have broadly met the conditions conducive to the development of capital and
equity markets. On the one hand, the credibility of Asian governments has been
nurtured by a responsive fiscal policy, and at least so far by rigorous monetary
policy, cautious deregulation and privatization, liberalization of foreign exchange,