The Time-varying Impact of China’s Economic Rebalancing on Korea’s Exports to China

While China seeks to shift from exports and investment to a consumption-oriented economy and to increase the self-sufficiency rate of exports, this study uses time-varying parameter vector autoregression (TVP-VAR) to examine the impact of economic structural changes in China on Korea’s exports to China over time. The study results suggest that the impact of China’s export shocks on Korea’s exports has weakened, which demonstrates the slowdown in regional production fragmentation, considering that Korea’s export goods are mainly intermediate goods. Instead, the influence of China’s domestic demand shock on Korea’s exports has expanded, which implies that China has increasingly become the final destination of intermediate goods made in Korea.     

The myth of China’s monetization

This article develops a simple model of M2/GDP based on the money demand function of Milton Friedman. This model proves that M2/GDP is positively related to the expected wealth and negatively related to the opportunity costs of holding money. China’s extremely high monetization ratio as measured by M2/GDP is the result of a decades-long rapid economic growth and a depressed financial system. Fast economic growth leads to high expected wealth. A depressed financial system leads to low opportunity costs of holding money. The combination of those two factors increases money demand and leads to very high M2/GDP. The model is verified indirectly by testing two implied testable hypothesizes. The study of this article raises questions on the accuracy of M2/GDP as a measure of monetization.     

The People’s bank of China’s response to the coronavirus pandemic: A quantitative assessment

The People’s Bank of China (PBoC) has implemented numerous measures to cushion the impacts of the COVID-19 health crisis on the Chinese economy. Since the current monetary policy framework features a multi-instrument mix of liquidity tools and pricing signals, we employ a dynamic-factor modelling approach to derive a composite indicator of China’s monetary policy stance. Our quantitative assessment shows that the PBoC’s policy response to the outbreak of the COVID-19 pandemic has been swift and decisive. Specifically, our estimates reveal that the PBoC has implemented novel policy measures to ensure that commercial banks maintain liquidity access and credit provision during the COVID-19 crisis.     

China’s efforts to contain Renminbi’s depreciation and the relating impacts

China began to face Renminbi (RMB) depreciation pressure since 2014Q2, and the 8/11 reform in 2015 exacerbated the RMB depreciation pressure against USD. To contain the depreciation pressure, the People’s Bank of China (PBC) adopted three methods. Firstly, PBC tried to stabilize the exchange rate by selling USD and purchasing RMB, which resulted in the fast shrinking of China’s foreign exchange reserve. Secondly, PBC strengthened the regulation of capital outflows, which caused the stagnation of RMB internationalization. Thirdly, PBC frequently changed the pricing mechanism of the daily fixing of RMB to USD, which led to the reverse of the liberalization of RMB exchange rate. Under the new environment of RMB depreciation pressure and much lower foreign exchange reserve, Chinese government changed its strategies and became more cautious and pragmatic in outward foreign direct investment, RMB internationalization, and Belt & Road Initiative construction.     

Usury,Market Power and Poverty Traps: A Study of Rural Credit in 1930s’ China

This paper studies the cross-regional variation of interest rates in China in the 1930s. Based on county-level data from the Buck (1941) rural surveys, we examine factors that may have influenced rural interest rates in pre-1949 China. Since the quality of institutions that define property rights and facilitate contract enforcement is important for such transactions as land tenancy arrangements, we treat land tenancy rate (or percentage of owner-farmers) as a proxy for institutional quality. Contrary to the popular belief among historians and economists that usury or high interest rates caused persistent poverty, we find that while the monopoly-exploitation hypothesis has little explanatory power, a region’s institutional quality and income level are persistent and significant determinants of interest rates. Thus, poverty is a key driver of high rates of interest. Economic growth and the development of market institutions are crucial for lowering high interest rates and combating usury.     

The intergenerational transmission of historical conflicts: An application to China’s trade

We study the legacy effect and transmission mechanisms of historical conflicts on contemporary trade. Using new data on the regional dispersion of civilian deaths due to massacres in the Sino-Japanese war (1931–1945), we find that local conflict intensity predicts international trade patterns of Chinese corporations three generations later. We further explore the transmission mechanism of collective war memory. Conflict intensity correlates with measures of anti-Japanese sentiments inferred from survey data and it appears to be transmitted both through war dramas in the mass media as well as official commemorations. We also find evidence that the trade-inhibiting effect increases with the time exposed to collective war memory.     

Time-varying transmission efficiency of China’s monetary policy

This paper tries to investigate the time-varying characteristics of China’s monetary policy transmission from the impulse response evidence of both open-economy DSGE model and TVP-VAR model. We find that the transmission efficiency of price-based monetary policy has significantly improved over the sample period, while quantity-based monetary policy is weakening. The resume of exchange reform in 2010 also strengthens the exchange rate channel especially in terms of price-based monetary policy. Combining with the evidence from DSGE model underlines the importance of further interest rate liberalization and price-based monetary policy Taylor rule should also consider the exchange rate stability.     

Spatial-Temporal Changes of Housing Bubbles in China’s Major Cities: 1999 to 2012

Existing literature is characterized by certain deficiencies in measuring housing bubbles in China. By extending the analytical framework of Black et al. (2006) to a spatial panel VAR structure, this paper measures housing bubbles in China’s 35 major cities from 1999Q2 to 2012Q3 and analyzes the spatial-temporal changes of the housing bubbles in these cities. Results indicate that 1) changes to housing bubbles in most cities highly correspond with changes in the main real estate policies of the country and 2) housing bubbles in eastern developed cities such as Beijing, Shanghai, Shenzhen, Hangzhou, and Ningbo, have been relatively large in recent years although the average housing bubble is not very serious over the 35 major cities. Through the Kernel Density Function and local indicators of spatial autocorrelation analysis, this paper finds that housing bubbles are concentrated in several eastern developed cities. Based on empirical analysis, this paper proposes policy recommendations on inhibiting the expansion and diffusion of housing bubbles.     

The role of price risk in China’s agricultural and fisheries exports to the US

This article explores the effect of price risk on the US importers’ optimal allocation of agriculture imports between the major supplier, China, and other competing countries. We first modify a demand system to account for the impacts of own-price risk and cross-price risk, and then apply the model to 16 agricultural and fisheries commodities exported to the US. The estimation results show that importers are sensitive to price risks of 14 Chinese commodities. Comparisons between price risk–trade relations of agricultural and fisheries products and between trade effects of cross-price risk on Chinese goods and substitutes provide strong evidence for explaining the observed trade patterns. Our study highlights the importance of price stability in promoting international trade, especially from developing countries to developed countries.     

Centralized Private Sector Planning: An Institutionalist’s Perspective on the Contemporary U.S. Economy

It is well accepted among Institutionalist and Post Keynesian scholars that portfolio investment markets are driven by agents' expectations rather than "the fundamentals." This explains, it is argued, why asset and currency prices are so much more volatile than and often clearly out of line with what we would otherwise consider to be their underlying determinants. What is rarely addressed, however, is how those expectations are formed. This paper fills the void by proposing a specific view of agents' expectations based on the mental model they employ to understand currency movements. The paper derives this schematic by examining market participants' psychological propensities and the world view of the subculture of which they are members. It will be shown that the model is consistent with the salient features of the foreign exchange market and it is employed to explain the dollar's fall from 2001 through 2008.     

Did China’s Rural Appliance Rebate program boost home appliance consumption during the latest recession?

This article investigates the effectiveness of China’s “Rural Appliance Rebate” (RAR) program in boosting rural appliance consumption during the latest economic recession. Based on two rounds of rural household survey data in China, we adopt a difference-in-difference matching approach to assess the extent to which these rebates induced greater rural appliance consumption than they otherwise would have. Our analysis finds that the RAR program boosted subsidized home appliance consumption, but its stimulus effects are driven mainly by cell phones, no significant impacts are detected on refrigerators and color TVs, and its impacts on aggregate home appliance consumption are not pronounced on the whole. Our investigation into the heterogeneity of these effects suggests that, for low income households, the RAR program prominently boost their aggregate home appliance consumption.     

Econometric analysis of China’s GDP growth and industrial structure

Since the Reform and Opening-up in 1978,China’s economy,society and other fields have developed very rapidly.Economic growth has achieved leapfrog development,and the three industries have achieved great development,but the overall industrial structure needs to be improved.At present,China’s economy has entered the “New Normal”.In order to achieve “Sound and Rapid” economic development,it is imperative to transform the industrial structure.Using econometric analysis and based on China’s economic...     

The effects of China’s split-share reform on firms’ capital structure choice

China’s split-share structure reform in 2005–2006 mitigates agency conflicts between controlling shareholders and minority shareholders and thus may bring substantial changes to corporate financing behaviour. This article examines the impact of that reform on the capital structure decisions of firms by applying a variety of trade-off and pecking-order models. Using data from 1176 non-financial Chinese listed firms during the period 2000–2012, we present empirical evidence indicating that equity tracks the financing deficit better than debt in Chinese firms, a finding which is not consistent with pecking-order theory. This phenomenon is more prominent after 2006 as share reform increases trading activity in the secondary stock market and improves the transparency of financial markets. In addition, Chinese firms have an optimal leverage ratio and they adjust below-target leverage ratios faster than above-target leverage ratios after the implementation of share structure reform, although they make symmetric adjustments towards the target leverage ratio before 2007. Finally, recent share reform has prompted Chinese firms to more quickly address the divergence of actual leverage ratios from long-term target levels, but has slowed their response to short-term target leverage divergence.     

What leads to official corruption in China? A politico-economic analysis of economic opportunities and government corruption across China’s provinces

This paper investigates the relationship between economic opportunities and official corruption in China. We construct a cross-province sample of corrupted officials to analyse the effects on official corruption of mineral reserve, coal production, real estate and road construction, while including control variables such as population, GDP per capita, economic growth rate, private assets, provincial government capacity, fiscal transparency and distance of the province from Beijing. Spanning from December 2012 to November 2015, our sample contains 526 high-level government officials who worked in various provinces in China. We find through multivariate regression that economic opportunities represented by coal, minerals, real estate and road construction all have a positive and significant effect on official corruption in China at the levels of provincial department director or deputy director; meanwhile, capacity of political extraction, road construction and coal production are better indicators of official corruption at the level of governor or deputy governor.     

A generalization of Condorcet’s Jury Theorem to weighted voting games with many small voters

We extend Condorcet’s Jury Theorem (Essai sur l’application de l’analyse à la probabilité des décisions rendues à la pluralité des voix. De l’imprimerie royale, 1785) to weighted voting games with voters of two kinds: a fixed (possibly empty) set of ‘major’ voters with fixed weights, and an ever-increasing number of ‘minor’ voters, whose total weight is also fixed, but where each individual’s weight becomes negligible. As our main result, we obtain the limiting probability that the jury will arrive at the correct decision as a function of the competence of the few major players. As in Condorcet’s result the quota q = 1/2 is found to play a prominent role. I wish to thank Maurice Koster, Moshé Machover, Guillermo Owen and two anonymous referees for helpful comments.     

China’s competition and the export price strategies of developed countries

This paper analyzes the impact of Chinese competition on developed countries’ export prices. The empirical application is on Italy, one of the main European manufacturing exporters with exports at high risk of competition from China. Our results show that, following China’s entry into the WTO, the price strategies of Italian firms has been affected. While in general the increasing Chinese export competition resulted in an upgrading of products exported, the impact has been different according to the sector and technological level. The incentives to upgrade have been stronger for low technology sectors, where competition is tougher and varieties of products sold lower. To highlight quality differentials, and isolate the effects on the different segments of the distribution of Italy’s export prices, we run quantile regressions. We find that are mainly those products sold at low prices to face a strong pressure to upgrade.