Credit Booms in Developing Countries: Are They Different from Those in Advanced and Emerging Market Countries?

While earlier studies focus on credit booms in advanced and emerging market countries, this paper examines the characteristics and determinants of credit booms in developing countries. The results find that credit booms in developing countries are less likely to be associated with systemic banking crises. Rather, they are more likely to be the result of financial deepening than of dangerous buildups of financial risks; the prevention of credit booms in developing countries may thus be associated with higher opportunity costs in terms of foregone growth opportunities. Random effect probit and tobit regressions find some evidence that credit booms are likely to start when the economy is expanding and if the financial sector is larger. Although monetary and fiscal policies do not help in preventing credit booms in developing countries, we find that prudential regulations and supervision can play a much more effective role in preventing “bad” booms, while incurring substantially lower costs. Although “bad” booms are hard to identify ahead of time, the duration and size of booms, as well as the level of credit aggregates, appear to be useful indicators in determining them.     

Bank lending and the business cycle: Does ownership matter in ASEAN countries?

We analyze the lending cyclicality of 213 ASEAN commercial banks over the period 2001–2015. The findings indicate that lending by private banks is procyclical while lending by state banks is countercyclical. Long-term liabilities also move countercyclically for state banks whereas funding for non-state banks in the form of deposit and long-term liabilities is procyclical. Greater lending cyclicality is observed for both private and state banks in Cambodia, Myanmar, Laos, and Vietnam (CMLV) compared to Indonesia, Malaysia, the Philippines, Thailand, and Singapore (ASEAN-5). Lending of non-ASEAN based foreign banks shows greater procyclicality than that of domestic banks for the ASEAN-5 countries, although not for the CMLV countries. During the global financial crisis, lending by non-ASEAN based foreign banks contracted sharply even as lending by ASEAN based foreign banks was unaffected. Overall, our results confirm that bank ownership influences lending and funding sensitivity to economic fluctuations.     

The role of credibility in the cyclical properties of macroeconomic policies in emerging economies

Optimal stabilization policy is countercyclical, aiming at keeping output close to its potential. However it has been traditionally argued that emerging countries are unable to adopt countercyclical monetary and fiscal policies. Here we argue that the cyclical properties of macroeconomic policies depend critically on policy credibility. We test this proposition by making use of recent panel data for eleven emerging market economies and time series data for Chile. The evidence supports that countries with higher credibility, as reflected by lower country risk levels, are able to conduct countercyclical fiscal and monetary policies. Conversely, countries with less credible policies (and, therefore, with higher country risk spreads) contribute to larger cyclical fluctuations by applying procyclical policies. For Chile we find that both monetary and fiscal policies have been largely countercyclical after 1993. JEL no. E43, E52, E62     

Stock Prices, Output and the Monetary Regime

Should monetary policy react to stock prices? The answer depends on whether stock prices are good predictors of future economic activity. Using long annual time-series data for the G-7 countries, data going back over 150 years for some countries, we find that stock prices do not systematically predict output growth regardless of the monetary regime in effect. We also find no evidence of a nonlinear relationship between stock prices and output except during the gold standard, when stock price booms and busts had some predictive power for output growth volatility.     

Excess Liquidity,Housing Price Booms and Policy Challenges in China

Incorporating asymmetric cost and benefit of supplying excess liquidity into an otherwise standard time inconsistency model, this paper offers an explanation of the excess liquidity and housing price booms recently experienced in China. We find that the central bank's incentive to stimulate economic growth with excess liquidity fuels real estate prices and accelerates inflation bias. Therefore, the central bank should free itself from the pressure to achieve an economic growth rate higher than the potential level, and assign an appropriate weight to the real estate price fluctuations in the central bank's objective function, so that the central bank's policy of stimulating economic growth with excess liquidity can be constrained.     

China trade: Busting gravity's bounds

Since China's accession to the World Trade Organization in 2001, annual growth rates of its imports and exports have increased, and raised tensions between China and some of its major trading partners. Using a gravity model of trade, we find that China's orientation toward foreign trade is much greater than expected for an economy of its size and level of development. Our analysis shows that China's excessive orientation toward foreign trade (“over-trading”) varies substantially across countries and we consider various explanations for the over-trading. A comparison of China's export boom with the earlier export booms of more market-based East and Southeast Asian economies shows that China's export boom has exceeded earlier booms in magnitude but not in duration. We conclude with a discussion of the likely scale of future export and import flows from and to China.     

China's outward foreign direct investment in the Belt and Road Initiative: What are the motives for Chinese firms to invest?

Because of the potentially large and important effects of the extremely ambitious Belt and Road Initiative (BRI) launched by China in late 2013, considerable attention has been given to the motives for, and repercussions of, the BRI-driven infrastructural projects. Yet, the non-infrastructural outward foreign direct investment (FDI) from China to BRI countries, which varies quite substantially across different sectors and different countries, has not yet received much attention. In contrast to some recent studies showing that the massive initiative has increased China's total FDI outflows to fellow BRI countries, in this paper, based on our sector-level difference-in-differences models, we find that effect to be statistically insignificant. Yet, at the same time, we provide empirical evidence on the sectoral pattern of China's outward FDI before and after 2014 indicating that China's FDI outflows to BRI countries have significantly increased in sectors characterized by overcapacity and contributing to pollution in China, thereby demonstrating that China's BRI-driven outward FDI has been very selective in terms of sectors. We confirm these findings with a variety of robustness checks and show that it is BRI countries with relatively low institutional quality that have been more likely to receive these types of FDI from China. We thus speculate that Chinese firms have been motivated to place FDI investments in BRI countries for the sake of alleviating China's own overcapacity and pollution problems. Our findings lead us to suggest that, although these sectoral patterns are consistent with the different stages of economic development in which China and its fellow BRI-identified countries find themselves, Chinese investors and host country governments should be more concerned with the potential for unwanted side-effects of the FDI investments so that the mutually beneficial effects of the BRI can be sustained into the indefinite future among all countries involved.     

Determinants of pollution: what do we really know?

The recent literature proposes many variables as significant determinants of pollution. This paper gives an overview of this literature and asks which of these factors have an empirically robust impact on water and air pollution. We apply Extreme Bound Analysis (EBA) on a panel of up to 120 countries covering the period 1960–2001. We find supportive evidence of the existence of the environmental Kuznets curve for water pollution. Furthermore, mainly variables capturing the economic structure of a country affect air and water pollution.     

Earning reduction caused by air pollution: Evidence from China

This paper investigates the effect of air pollution on employees' earnings in China. Using both instrument variable (IV) and regression discontinuity design (RDD), we find that air pollution reduces employees' yearly earnings. A one μg/m³ increase in yearly PM_2.5 decreases employees' yearly earnings by 175.4 CNY. The total loss in earnings for all employees working for our sample firms amounts to about 268.59 million CNY. Our estimations are not sensitive to a battery of different robustness checks. We also find that the effect of air pollution differs based on several factors including labor intensity, ownership types and firm size. Our mechanism tests indicate that air pollution can reduce employees' earnings by lowering their unit wage and reducing their working time. The resulting increase in firms' labor costs further undermines their operating status. Notably, air pollution exerts a non-linear negative effect on employees' earnings. Overall, our findings suggest that air pollution can significantly lower employees' benefits by reducing their earnings. Our paper also provides powerful support for formulating environmental regulations in the future.     

Gone with the wind? Emissions of neighboring coal-fired power plants and local public health in China

Based on a nationwide representative county-level dataset from China, this article empirically examines the spillover effects of air pollution from neighboring coal-fired power plants on local mortality rates due to cardiovascular and respiratory diseases. We combine data on power plants' industrial output with information on wind direction and speed to proxy for air pollution, and find that air pollution from neighboring power plants indeed has significant negative effects on local public health. The resulting treatment costs are also enormous. Our findings shed light on the necessity of intergovernmental cooperation in environmental governance.     

Growing pains for others: Using holidays to identify the pollution spillover between China and South Korea

Transboundary pollution spillovers have emerged as an important global issue in designing optimal regional economic policies. In particular, China and South Korea have been at odds over which country is the “source of evil” and responsible for their air pollution. This study investigates this issue and identifies the burden of the environmental externalities of pollution between China and South Korea. There are two novelties of this study: first, we employ a unique daily pollution indicator, that is, air visibility, to address data limitations. Second, we propose a novel identification strategy to examine the pollution spillovers of economic activities by exploiting the different holiday arrangements between China and South Korea. Evidence indicates significant bilateral environmental externalities between China and South Korea. Therefore, China and South Korea should make joint efforts to deal with their environmental challenges.     

Industrialization,indoor and ambient air quality,and elderly mental health

The health risks from indoor and ambient air pollution create a considerable burden to global economic development and health, especially in economies within an aging society. Previous research has established the adverse effects of air pollution on health. However, most studies do not focus on the simultaneous effect of indoor and ambient air pollution nor its health risks to the older population. This study examines the impact of exposure to both indoor and ambient air pollution for the same individuals over time on mental health by using a nationally representative longitudinal survey for middle-aged and elderly individuals in China. We find that both indoor and ambient air pollution have an adverse effect on elderly mental health and significantly increases the likelihood of having depressive symptoms. We provide evidence that the effect of indoor and ambient air pollution is associated more with less educated and females.     

Policy Shocks and Macroeconomic Fluctuations in a Two‐country Dynamic Stochastic General Equilibrium Model: Evidence from China*

In this paper, we construct a two‐country dynamic stochastic general equilibrium model to investigate the sources of business cycles in China and the contributions of policy shocks in economic fluctuations. The empirical results from Bayesian estimation show that, apart from the traditional supply and demand shocks, monetary and fiscal policy shocks also play important roles in determining China's economic fluctuations. In addition, we find significant feedback effects between monetary and fiscal policies in China, indicating that policy coordination is an important feature of China's monetary and fiscal policies. Overall, these results not only shed new light on the policy factors behind China's economic fluctuations, but also provide new evidence that is helpful for understanding the policy transmission mechanisms in China.     

OUTPUT-INFLATION TRADEOFF IN CHINA

High growth and wide fluctuations in fixed investment are the main driving forces causing inflation in China during its economic reform period. Investment expansion generates strong demand pressures in the consumption goods market. Its inflationary impact is magnified further as it brings about higher wage costs during economic booms. In the paper, an implied short-run tradeoff has been derived from the dynamic simulation of a small macroeconomic model. In a given year, each additional percentage point of aggregate output growth or investment growth will bring about a 2.6 or a 0.9 per cent increase, respectively, in the rate of inflation for that year. These estimates suggest that the surge in fixed investment accounts almost fully for the 1993–95 inflationary spell.     

Out-migration and economic cycles

Out-migration concerns foreigners who decide to leave a country where they used to live. Taking advantage of the OECD bilateral IMS database, we analyze the short-run determinants of out-migration using a panel of Schengen countries between 1995 and 2011. We find that out-migration is counter-cyclical: foreign nationals tend to leave host countries with high unemployment, while they are likelier to stay in good times (i.e. low unemployment). Typically, a 10 % increase in the unemployment rate leads to a 5 % increase in out-migration. Thus, short-term economic fluctuations have the same qualitative effect as restrictive migration policies in economic downturns. However, we find mixed evidence for the role of economic cycles in the potential destination countries of those flows. Movers appear to be sensitive to unemployment changes in their country of origin, but they do not seem to be sensitive to business cycles in potential destinations.     

The health costs of the industrial leap forward in China: Evidence from the sulfur dioxide emissions of coal-fired power stations

In this study, we attempt to empirically test the effects of air pollution on public health in China. Using three-stage least squares (3SLS) to solve the potential endogeneity problem in sulfur dioxide (SO₂) emissions, we find that air pollution has significant negative effects on public health. Specifically, a 1% increase in SO₂ emissions is found to lead to 0.067 and 0.004 more deaths per 100,000 population due to respiratory diseases and lung cancer, respectively. In terms of absolute magnitude, every one million ton increase in SO₂ emissions results in 0.735 and 0.052 extra deaths due to respiratory diseases and lung cancer per 100,000 population, respectively. Moreover, SO₂ emissions result in 230,000 extra deaths every year and the related economic costs over the study period amount to RMB 8.179 billion.     

基于技能偏向性技术进步的经济增长动能分解

在传统Solow增长核算框架基础上引入异质性劳动投入以及技能偏向性技术进步,从而将经济增长分解为固定资本投入增长、劳动投入增长、技能结构深化、技能偏向性技术进步、中性技术进步及效率改进等五种动能。研究发现：第一,中国经济增长主要由固定资本投入以及全要素生产率增长共同驱动,其中资本投入对经济增长年均贡献率为61.64%,全要素生产率增长的年均贡献率则为35.66%,中国区别于其他中低收入国家的发展奇迹背后正是较快的全要素生产率增长;第二,即使对于高收入国家而言,资本投入仍然是主要的经济增长动能;第三,技能结构深化以及技能偏向性技术进步是全要素生产率的主要来源,二者对中国经济增长的年均贡献率分别为32.04%和21.27%;第四,资源配置效率变化是引起全要素生产率波动的主要因素,资源配置效率下降是导致2008年后中国以及大部分高收入国家全要素生产率增速放缓的主要原因。     

Welfare loss of China's air pollution: How to make personal vehicle transportation policy

Given China's notorious air pollution, particularly fine particulate matter (PM_2.5) pollution, a detailed understanding of socio-economic costs of air pollution and potential impacts of its abatement policies is crucial for policy-making if sustainable development is to be realized. To provide the first study of its kind for China, this paper builds an integrated assessment framework based on a computable general equilibrium (CGE) model. We find China's air pollution (PM_2.5, ozone, and coarse particles ranging from 2.5 to 10 μm) to be a staggering threat to human health, economy and residential welfare. Furthermore, there is empirical evidence for much more importance of the PM_2.5 issue. In addition, we investigate the impacts of alternative personal vehicle transportation policies. In terms of gross benefits, the results indicate that the total substitution of plug-in hybrid electric vehicles (PHEVs) for the existing personal internal combustion engine vehicles (ICEVs) would be more beneficial to national air quality and human health than the combination of stringent fuel economy and emission standards for ICEVs, even in the Chinese case of coal-heavy electric grids.     

国际油价波动对我国经济发展影响及对策问题研究

石油对于各国特别是工业化进程中国家的经济和社会发展起着举足轻重的作用,而近年来,国际油价的波动一直是国际经济中的敏感话题。本文分析了我国目前石油消费和进口的基本情况,并研究了国际油价的波动对我国经济发展所产生的重要影响,分别从连续上涨和连续下跌两方面所产生的影响进行研究,最后得出国际油价波动下我国经济发展的策略。