Pub Date : 2020-01-17DOI: 10.3868/S060-008-019-0024-2
Hiroya Akiba
This paper theoretically considers the long-run sustainability of China's monetary-cum-exchange rate policy under the impossible trinity. Two different models are examined: One sterilizes current net foreign assets (NFAs) and the other focuses on NFAs realized in the previous period. Under the de facto opening of financial flows, sterilization yields a negative risk premium in uncovered interest parity (UIP) that triggers a feedback increase among capital inflows. Here, stability depends on the magnitudes and the combination of structural and policy parameters. It is shown that if current capital inflows are sterilized, the monetary-cum-exchange rate policy in China offers a sustainable solution for exchange rates that are relatively stringently managed. However, such a solution can be obtained for relatively flexible or moderately managed rates if sterilization policy is implemented on the previous period's inflows.
{"title":"Sustainability of Monetary-cum-Exchange Rate Policy in China","authors":"Hiroya Akiba","doi":"10.3868/S060-008-019-0024-2","DOIUrl":"https://doi.org/10.3868/S060-008-019-0024-2","url":null,"abstract":"This paper theoretically considers the long-run sustainability of China's monetary-cum-exchange rate policy under the impossible trinity. Two different models are examined: One sterilizes current net foreign assets (NFAs) and the other focuses on NFAs realized in the previous period. Under the de facto opening of financial flows, sterilization yields a negative risk premium in uncovered interest parity (UIP) that triggers a feedback increase among capital inflows. Here, stability depends on the magnitudes and the combination of structural and policy parameters. It is shown that if current capital inflows are sterilized, the monetary-cum-exchange rate policy in China offers a sustainable solution for exchange rates that are relatively stringently managed. However, such a solution can be obtained for relatively flexible or moderately managed rates if sterilization policy is implemented on the previous period's inflows.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"604-628"},"PeriodicalIF":0.8,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42478511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-17DOI: 10.3868/S060-008-019-0022-8
M. Peng, D. Jiang, Yingjie Wang
This paper provides the first empirical study on bond defaults in the Chinese market. It overcomes the deficiencies of existing methods, which suffer from lack of actual default data for back testing. With newly available bond default data, we analyze the roles of market variables against accounting variables under various models. While we find that Merton's market-based structural model and KMV's Distance to Default exhibit languid discriminating power compared with hazard models that have carefully constructed predictors, other market variables carry significant information about bond defaults and could help improve on models with only the accounting variables. This implies that the collective intelligence of the market could somehow mitigate the distortion caused by misreported accounting information. Further, model performance can be significantly improved by adding predicting variables that link an individual financial measure to the broader market performance, such as the relative margin—a business environment proxy introduced in this study. We not only shed light on the default behavior of the Chinese bond market, but also provide a promising approach to improve the variable selection process.
{"title":"Forecasting Chinese Corporate Bond Defaults: Comparative Study of Market- vs. Accounting-Based Models","authors":"M. Peng, D. Jiang, Yingjie Wang","doi":"10.3868/S060-008-019-0022-8","DOIUrl":"https://doi.org/10.3868/S060-008-019-0022-8","url":null,"abstract":"This paper provides the first empirical study on bond defaults in the Chinese market. It overcomes the deficiencies of existing methods, which suffer from lack of actual default data for back testing. With newly available bond default data, we analyze the roles of market variables against accounting variables under various models. While we find that Merton's market-based structural model and KMV's Distance to Default exhibit languid discriminating power compared with hazard models that have carefully constructed predictors, other market variables carry significant information about bond defaults and could help improve on models with only the accounting variables. This implies that the collective intelligence of the market could somehow mitigate the distortion caused by misreported accounting information. Further, model performance can be significantly improved by adding predicting variables that link an individual financial measure to the broader market performance, such as the relative margin—a business environment proxy introduced in this study. We not only shed light on the default behavior of the Chinese bond market, but also provide a promising approach to improve the variable selection process.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"536-582"},"PeriodicalIF":0.8,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46522607","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-17DOI: 10.3868/S060-008-019-0023-5
Qingzhu Shi, Chen Wang, Wei Wang
{"title":"Liquidity Shock, Credit Constraint and the Development of Private vs. State-Owned Enterprises","authors":"Qingzhu Shi, Chen Wang, Wei Wang","doi":"10.3868/S060-008-019-0023-5","DOIUrl":"https://doi.org/10.3868/S060-008-019-0023-5","url":null,"abstract":"","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"583-603"},"PeriodicalIF":0.8,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48489382","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-17DOI: 10.3868/S060-008-019-0025-9
Lixue Wu, Cheng Liu
{"title":"Project Matching and Overcapacity in China","authors":"Lixue Wu, Cheng Liu","doi":"10.3868/S060-008-019-0025-9","DOIUrl":"https://doi.org/10.3868/S060-008-019-0025-9","url":null,"abstract":"","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"629-669"},"PeriodicalIF":0.8,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46501947","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-01DOI: 10.3868/S060–008–019–0015–2
D. Rodrik
Research on industrial policy has taken off, leading to a better understanding of when such policies effectively harness economic development. This article reviews the recent literature on the economics of industrial policies. Until recently, empirical studies on industrial policies came largely in one of two types: detailed country/region studies and cross-industry or cross-country econometric studies. I point out that the country/region studies had the usual problem that it was difficult to trace the effects of success to specific industrial policies, while the econometric studies suffered from the problem of misspecification. I show that a new generation of work has been moving us beyond the largely ideological debates of the past to a more contextual, pragmatic understanding.
{"title":"Where Are We in the Economics of Industrial Policies","authors":"D. Rodrik","doi":"10.3868/S060–008–019–0015–2","DOIUrl":"https://doi.org/10.3868/S060–008–019–0015–2","url":null,"abstract":"Research on industrial policy has taken off, leading to a better understanding of when such policies effectively harness economic development. This article reviews the recent literature on the economics of industrial policies. Until recently, empirical studies on industrial policies came largely in one of two types: detailed country/region studies and cross-industry or cross-country econometric studies. I point out that the country/region studies had the usual problem that it was difficult to trace the effects of success to specific industrial policies, while the econometric studies suffered from the problem of misspecification. I show that a new generation of work has been moving us beyond the largely ideological debates of the past to a more contextual, pragmatic understanding.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"329-335"},"PeriodicalIF":0.8,"publicationDate":"2019-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42547887","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-01DOI: 10.3868/S060–008–019–0016–9
Yunpeng Sun, Jingjia Zhang
Since 2002, the People's Bank of China has frequently used both quantity-based direct monetary instruments and price-based indirect monetary instruments to promote economic growth and stabilize price level. Specifically, this study estimates 13 three-variable factor-augmented vector autoregression (FAVAR) models to explore how two types of monetary instruments affect China's economy and price level. Overall, we find that monetary policy has positive effects on China's economy and price level. Second, this study clearly states that the effectiveness of China's monetary policy on the economy has depended on China's quantity-based direct monetary instruments since 2002. Third, the effectiveness of quantity-based direct monetary instruments on China's economy and price level is dependent on the significant and positive effects of quantity-based direct monetary instruments after the 2008 financial crisis. Fourth, the significant and positive effects of price-based indirect monetary instruments on China's economy and price level before 2008 cannot fundamentally change their current insignificant effects on China's economy and price level.
{"title":"Effectiveness of Monetary Policy in China: Evidence from Factor-Augmented Vector Autoregression Model","authors":"Yunpeng Sun, Jingjia Zhang","doi":"10.3868/S060–008–019–0016–9","DOIUrl":"https://doi.org/10.3868/S060–008–019–0016–9","url":null,"abstract":"Since 2002, the People's Bank of China has frequently used both quantity-based direct monetary instruments and price-based indirect monetary instruments to promote economic growth and stabilize price level. Specifically, this study estimates 13 three-variable factor-augmented vector autoregression (FAVAR) models to explore how two types of monetary instruments affect China's economy and price level. Overall, we find that monetary policy has positive effects on China's economy and price level. Second, this study clearly states that the effectiveness of China's monetary policy on the economy has depended on China's quantity-based direct monetary instruments since 2002. Third, the effectiveness of quantity-based direct monetary instruments on China's economy and price level is dependent on the significant and positive effects of quantity-based direct monetary instruments after the 2008 financial crisis. Fourth, the significant and positive effects of price-based indirect monetary instruments on China's economy and price level before 2008 cannot fundamentally change their current insignificant effects on China's economy and price level.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"336-370"},"PeriodicalIF":0.8,"publicationDate":"2019-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43530326","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-11-01DOI: 10.3868/S060–008–019–0017–6
Leo H. Chan, Maritza Sotomayor, D. Lien
Foreign direct investment (FDI) and foreign remittance have been the main sources of external capital inflows for many developing countries. FDI has been credited as the main driver of rapid economic growth in many Asian countries/regions in recent decades. However, this effect of FDI on long-run economic growth has not been observed in Latin American countries. Now, the question is whether FDI and an increase in foreign remittances in the past two decades have achieved expected positive results in terms of economic growth for emerging economies. This study uses a generalized method of moments (GMM) dynamic panel model to quantify the impacts of FDI and foreign remittances as sources of foreign capital for Asia and Latin America. Our findings suggest that FDI and remittances perform differently in different regions in terms of their impacts on GDP growth. Countries that have specific policies (i.e., industrial policy, domestic content requirement, and export production targets) for FDI are likely to derive more significant benefits from FDI and remittances. Developing countries that are emerging or lagging should learn from the countries with positive outcomes and implement similar policies.
{"title":"Impacts of the Contributions of FDI and Remittances on the Economic Growth in Asia and Latin America: A Comparative Study","authors":"Leo H. Chan, Maritza Sotomayor, D. Lien","doi":"10.3868/S060–008–019–0017–6","DOIUrl":"https://doi.org/10.3868/S060–008–019–0017–6","url":null,"abstract":"Foreign direct investment (FDI) and foreign remittance have been the main sources of external capital inflows for many developing countries. FDI has been credited as the main driver of rapid economic growth in many Asian countries/regions in recent decades. However, this effect of FDI on long-run economic growth has not been observed in Latin American countries. Now, the question is whether FDI and an increase in foreign remittances in the past two decades have achieved expected positive results in terms of economic growth for emerging economies. This study uses a generalized method of moments (GMM) dynamic panel model to quantify the impacts of FDI and foreign remittances as sources of foreign capital for Asia and Latin America. Our findings suggest that FDI and remittances perform differently in different regions in terms of their impacts on GDP growth. Countries that have specific policies (i.e., industrial policy, domestic content requirement, and export production targets) for FDI are likely to derive more significant benefits from FDI and remittances. Developing countries that are emerging or lagging should learn from the countries with positive outcomes and implement similar policies.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"371-400"},"PeriodicalIF":0.8,"publicationDate":"2019-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41774303","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-17DOI: 10.3868/S060-008-019-0011-4
Stephen Martin
Kreps and Scheinkman (1983)'s celebrated result is that in a two-stage model of a market with homogeneous products in which firms noncooperatively pick capacities in the first stage and set prices in the second stage, the equilibrium outcome is that of a one-shot Cournot game. This note derives capacity best response functions for the first stage and extends the Kreps and Scheinkman result to the case of differentiated products.
{"title":"Kreps & Scheinkman with Product Differentiation","authors":"Stephen Martin","doi":"10.3868/S060-008-019-0011-4","DOIUrl":"https://doi.org/10.3868/S060-008-019-0011-4","url":null,"abstract":"Kreps and Scheinkman (1983)'s celebrated result is that in a two-stage model of a market with homogeneous products in which firms noncooperatively pick capacities in the first stage and set prices in the second stage, the equilibrium outcome is that of a one-shot Cournot game. This note derives capacity best response functions for the first stage and extends the Kreps and Scheinkman result to the case of differentiated products.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"203-219"},"PeriodicalIF":0.8,"publicationDate":"2019-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46708913","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-17DOI: 10.3868/S060-008-019-0014-5
F. Jabalameli, E. Rasoulinezhad
This is the first study attempting to investigate the patterns of BRICS' imports and exports with five United Nations regional groups: the African, Asia-Pacific, Eastern European, Latin American and Caribbean, and Western European and Others. A panel data gravity trade model with series from 2001 to 2016 was used to estimate the gravity variables in the models. The main results provide evidence that reinforced the dissimilarities in the foreign trade patterns of BRICS with these five regional groups. The econometric results substantiated that BRICS' foreign trade patterns are sensitive to changes in the economies of trading partners from the more developed regions. This is evidence for stronger economic ties between BRICS and the more developed regions such as Western Europe and Asia-Pacific. It also reveals the trade convergence of BRICS in these developed regions.
{"title":"Do BRICS Have Similar Disaggregated Trade Patterns with Different Regions","authors":"F. Jabalameli, E. Rasoulinezhad","doi":"10.3868/S060-008-019-0014-5","DOIUrl":"https://doi.org/10.3868/S060-008-019-0014-5","url":null,"abstract":"This is the first study attempting to investigate the patterns of BRICS' imports and exports with five United Nations regional groups: the African, Asia-Pacific, Eastern European, Latin American and Caribbean, and Western European and Others. A panel data gravity trade model with series from 2001 to 2016 was used to estimate the gravity variables in the models. The main results provide evidence that reinforced the dissimilarities in the foreign trade patterns of BRICS with these five regional groups. The econometric results substantiated that BRICS' foreign trade patterns are sensitive to changes in the economies of trading partners from the more developed regions. This is evidence for stronger economic ties between BRICS and the more developed regions such as Western Europe and Asia-Pacific. It also reveals the trade convergence of BRICS in these developed regions.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"302-328"},"PeriodicalIF":0.8,"publicationDate":"2019-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44887654","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-07-17DOI: 10.3868/S060-008-019-0009-3
J. Stiglitz
In this article, Nobel Prize Laureate Joseph Stiglitz argues that the standard macro-economic paradigm has failed not only to predict the crisis but also to provide insights into the design of a regulatory framework that would make a recurrence less likely. He points out that many of the underlying assumptions of the standard paradigm always seemed implausible and many of its predictions, such as those concerning the micro-economic behavior of the constituents (firms and households), are inconsistent with the empirical evidence. He then identifies a number of key modeling challenges, what he views as key ingredients that have to be incorporated in any model that is going to describe economic fluctuations or be the basis of a well-designed regulatory or monetary framework.
{"title":"An Agenda for Reforming Economic Theory","authors":"J. Stiglitz","doi":"10.3868/S060-008-019-0009-3","DOIUrl":"https://doi.org/10.3868/S060-008-019-0009-3","url":null,"abstract":"In this article, Nobel Prize Laureate Joseph Stiglitz argues that the standard macro-economic paradigm has failed not only to predict the crisis but also to provide insights into the design of a regulatory framework that would make a recurrence less likely. He points out that many of the underlying assumptions of the standard paradigm always seemed implausible and many of its predictions, such as those concerning the micro-economic behavior of the constituents (firms and households), are inconsistent with the empirical evidence. He then identifies a number of key modeling challenges, what he views as key ingredients that have to be incorporated in any model that is going to describe economic fluctuations or be the basis of a well-designed regulatory or monetary framework.","PeriodicalId":44830,"journal":{"name":"Frontiers of Economics in China","volume":"14 1","pages":"149-167"},"PeriodicalIF":0.8,"publicationDate":"2019-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44596581","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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