Publications
Forthcoming publications in refereed journals
Alphabetical Order
Abstract
This paper examines asymmetry of the loss function of professional forecasters for output growth, inflation, and exchange rate forecasts, based on the survey of professional forecasts (SPF) data of three South Asian countries (India, Indonesia, and Singapore). Our results provide India’s unbiased output growth forecasts and under-predicted inflation and exchange rate forecasts; Indonesia’s broadly unbiased forecasts; and Singapore’s under-predicted output growth forecasts and unbiased inflation and exchange rate forecasts. Testing the rationality of all three countries’ SPF forecasts, we find that all are rational under an asymmetric loss function but not under a symmetric loss function.
Publications in refereed journals in 2020
Alphabetical Order
Abstract
Governments, central banks, and private companies make extensive use of expert and market-based forecasts in their decision-making processes. These forecasts can be affected by terrorism, a factor that should be considered by decision-makers. We focus on terrorism as a mostly endogenously driven form of political uncertainty and assess the forecasting performance of market-based and professional inflation and exchange rate forecasts in Israel. We show that expert forecasts are better than market-based forecasts, particularly during periods of terrorism. However, the performance of both market-based and expert forecasts is significantly worse during such periods. Thus, policymakers should be particularly attentive to terrorism when considering inflation and exchange rate forecasts.
Publications in refereed journals in 2019
Alphabetical Order
Abstract
The recent experience during the debt and banking crises in the European Monetary Union (EMU) has demonstrated how important it is to consider liquidity (or rather the lack therof) in macroeconomics. Similar to the Fed´s policy during the US real estate crisis, the ECB took huge efforts to insert liquidity into the banking sector to prevent further financial turmoil, only to find that the transmission mechanism was severely hampered. Strong heterogeneity during the crises accentuated the difficulties of a common monetary policy. The main contribution of this paper is to show that properly measured liquidity contains substantial information on macroeconomic dynamics. Liquidity overcomes two problems of using interest rates (and interest rate spreads) as the main indicator of the monetary and financial side of the economy. First, contrary to the policy rate, they include information on the different impacts of monetary shocks between countries, thereby accounting for heterogeneity in the transmission mechanism and the different states of the banking sector. Second, (growth rates of) liquidity indicators are not subject to the zero lower bound problem and are thus particularly useful when considering samples, such as the recent crisis. We propose a range of liquidity indicators, based on Theil-Törnqvist index number, that are designed to account for measurement problems during times of financial turmoil, when liquidity preference - and thus the price of liquidity - can change quickly. We then study the information content of those variables.
Publications in refereed journals in 2018
Alphabetical Order
Abstract
We evaluate the directional accuracy of inflation forecasts based on the survey data of urban savings account holders in China. By using a new market-timing test, we show that the urban consumers' expectations of inflation are not as useful predictor of the overall consumer price index (CPI) and the urban household CPI (U-CPI) in China. However, after our in-depth analysis using the inflation rate of each cagtegory in the U-CPI basket, we find that the consumers' forecasts are useful in predicting the movement of the residence component in the U-CPI basket since the third quarter of 2009.
Publications in refereed journals in 2017
Alphabetical Order
Abstract
This study examines how household financial risk tolerance is affected during the period of 2007 and 2009, which covered the eve and through of the financial crisis in the United States and what types of households are associated with the change of risk tolerance. Risk tolerance is measured bz two objective indicators, narrowlz and broadlz defined stock ownership, and a subjective indicator, risk taking attitude. Using panel data from 2007 to 2009 Survez of Consumer Finances, results show that during the financial crisis, the households in general are more risk averse, indicated by withdrawing from stock markets and holding a less risk taking attitude. In addition, Black and Hispanic households are more likely and households with higher education are less likely to withdraw from stock markets. Older households are less likely to change in risk tolerance during the financial crisis, as are richer households. The findings show panel data could generate novel results and contribute to the literature of financial risk tolerance.
Publications in refereed journals in 2016
Alphabetical Order
Abstract
In this paper, we show that the "Merger Paradox" (Salant, Switzer and Reynolds, 1983) is mitigated when capacity constraint is considered. This is because outside firms who do not participate in a merger cannot expand their output beyond their existing capacity, and therefore, Stigler type of free riding is alleviated. When overcapacity is socially costly, it is also shown that a pro-merger fiscal policy may discourage ex ante capacity investment and hence alleviate overcapacity, if capacity building is not too costly. Furthermore, it can be shown that the optimal pro-merger subsidy is always welfare improving when it discourages capacity building.
Publications in refereed journals in 2015
Alphabetical Order
Abstract
The purpose of this study is to explore an important issue concerning the relationship among the local government deficit, land finance and real estate markets in China. This study uses a panel data of 30 provinces in China during 1999–2010 to estimate the panel smooth transition regression model. Since the estimated transition threshold value is 14.62, provinces with the ratio of fiscal deficits to GDP of greater than 14.62% are categorized as in the high fiscal difficulty (HFD) regime. Otherwise they are in the low fiscal difficulty (LFD) regime. The primary finding of this study is that the land leasing fee has a significantly positive influence on the total value of commodity buildings sold in the LFD regime. In addition, the local fiscal deficit has a significantly positive impact on the real estate market in the LFD regime, but this impact turns to be negative in the HFD regime.
Publications in refereed journals in 2014
Alphabetical Order
Abstract
A Fisher's Identity model is established to study Northern Song China's (960–1126) level of velocity of money using money supply and gross domestic product (GDP) data. Results of the exercise help rationalize what is called the “bronze coin” puzzle, which is the massive amount of minted coins seemingly incommensurate with price levels. It is shown that the velocity of money was increasing and comparable to pre-industrial England levels. This paper argues that the driving forces of the short supply of money are greater than usual hoarding by the state treasury and coin outflows to Song's trading partners via smuggling. Since velocity of money is an indicator of economic development in ancient societies, this paper provides a realistic validation of the premise of the Needham puzzle.
Publications in refereed journals in 2013
Alphabetical Order
Abstract
The literature has postulated that foreign capital participation (through mergers and acquisitions) is associated with more advanced technologies being injected into the acquired targets, and thus it might be reasonable to assume that foreign acquisitions would generate larger effects than domestic acquisitions to the acquired targets. This paper contributes to the discussion by examining the effects of foreign acquisitions versus domestic acquisitions on plant survival to both born-domestic and born-foreign plants. Using 26 cohorts of plants born in Canada between 1973 and 1998, the paper finds that both foreign acquisitions and domestic acquisitions significantly increase life durations of born-domestic plants, although domestic acquisitions generate larger effects. For born-foreign plants, neither foreign acquisitions nor domestic acquisitions significantly change their life span.
Publications in refereed journals in 2011
Alphabetical Order
Abstract
As academicians, we emphasize to our students to keep up with class, and always read ahead. When I took over as President-elect of the WSSA in April of 2008, while busy communicating with the Section Coordinators and plan the 2009 Annual Conference (Reno, Nevada), I would occasionally pause and ponder what I would present for my President Address (reading ahead). What do I know that would be of interest to the general membership of the WSSA? I naturally thought of China and its economic reform, as half of my research output over the last decade has been in this area. Then, the subprime crisis came to be, and I wondered about how the economy would cope. I can claim some expertise to the former, but of no special authority regarding the latter. However, I do have some thoughts regarding the role of the State during such economic upheavals, but in a more conceptual manner than a policy solution.