The effects of financial openness and financial efficiency on Chinese macroeconomic volatilities

This paper builds an open-economy DSGE model to study the effects of financial openness and financial efficiency on the macroeconomic volatilities and estimate the model with the Bayesian method and Chinese quarterly data from 2001Q1 to 2017Q4. We further test the validity of model predictions with panel analyses of Chinese provincial data from 1987 to 2016 and various robustness tests. The results show that: first, further financial openness will lead to an increase in output volatility but U-shaped changes in consumption and investment volatilities. Second, financial efficiency improvement helps to reduce the macroeconomic volatilities but has a diminishing marginal benefit. Third, our estimates of China's degree of financial openness and financial efficiency are both at the medium level close to the thresholds. It implies that further financial openness will dramatically increase the macroeconomic volatilities but whether financial efficiency improvement can mitigate instability is uncertain.     

Entrepreneurial innovativeness and growth ambitions in thick vs. thin regional innovation systems

Research in economic geography has paid increasing attention to regional innovation systems (RISs) as a potential vehicle for growth and development. Yet despite an increasing amount of research studying RISs in particular and economic regions in general, we have limited knowledge about their influence on entrepreneurs and entrepreneurship. We respond to this knowledge gap and study if entrepreneurs’ localization in thick vs. thin RISs affects their innovativeness and growth ambitions. Thick RISs are predominately urbanized spaces that include organizations of higher-level education, R&D intensive milieus, and an ample industry sector, while thin RISs to a lesser degree encompass these features. Empirically, we analyse 870–917 entrepreneurial firms in Agder of Southern Norway. Based on trade and labour markets, as defined by the EU’s classification of local administrative units (LAU1), we identify two thick and six thin RISs in Agder. Econometric analyses show that entrepreneurs located in thick RISs are more innovative than entrepreneurs located in thin RISs, but there are no significant differences concerning entrepreneurs’ growth ambitions. In light of our findings, we discuss the potential agency role played by entrepreneurial firms at a micro level on path dependent features of RISs at a macro level.     

Financial development and economic growth in a microfounded small open economy model

The global financial crisis since 2008 revived the debate on whether or not and to what extent financial development contributes to economic growth. This paper reviews different theoretical schools of thought and empirical findings on this nexus, building on which we aim to develop a unified, microfounded model in a small open economy setting to accommodate various theoretical possibilities and empirical observations. The model is then calibrated to match some well-documented stylized facts. Numerical simulations show that, in the long run, the welfare-maximizing level of financial develop is lower than the growth-maximizing level. In the short run, the price channel (through world interest rate) dominates the quantity-channel (through financial productivity), suggesting a vital role of international cooperation in tackling systemic risk of the global financial system.     

Impact of high-speed railway construction on spatial patterns of regional economic development along the route: A case study of the Shanghai–Kunming high-speed railway

The Shanghai–Kunming high-speed railway spans the eastern, central, and western regions of China and is an important "horizontal" in the "eight vertical and eight horizontal" railway network of China. This paper estimates the direct impact of opening a high-speed railway on the spatial patterns of regional economic development along the route by integrating GIS technology, spatial panel data models, and the entropy method. The results show that the high-speed railway can significantly increase the economic aggregate and urbanization rates along the route and promote the upgrading of industrial structures, but it has a limited effect on the economic growth rate, showing a weak trend. In terms of spatial patterns, the high-speed railway significantly improves regional accessibility, the strength of economic ties, and economic potential along the route. The regional economy is characterized by weak spatial agglomeration and presents a trend of balanced development. In general, although the economic effect of HSR for the economically lagged regions is smaller in the short term than that in the economically and less economically developed regions, the high-speed railway has the greatest impact on regional economic development and spatial patterns in economically backward areas, thus the economically backward regions have a greater posterior advantage, which is conducive to balancing regional economies and narrowing regional differences.     

Financial innovation and bank growth: The role of institutional environments

This research evaluates the impact of financial innovation on bank growth and how their growth is affected by various dimensions of institutional environments’ interaction with financial innovation. To address these relationships, we use different measures of financial innovation and bank growth from a panel dataset of 40 countries (OECD and non-OECD) over a sample period spanning from 1989 to 2011. There are three main findings herein. First, banks located in countries with a higher level of financial innovation exhibit better growth in assets, loans, and profits. This positive linkage remains highly significant in the subsample without considering the 2007–2008 global financial crisis. Second, bank regulations, financial reforms, and country governance indicators tend to weaken the relationship between financial innovation and bank growth. Third, globalization leans toward strengthening this relationship.     

Modeling regional economic dynamics: Spatial dependence,spatial heterogeneity and nonlinearities

Spatial modeling of economic phenomena requires the adoption of complex econometric tools, which allow us to deal with important methodological issues, such as spatial dependence, spatial unobserved heterogeneity and nonlinearities. In this paper we describe some recently developed econometric approaches (i.e. Spatial Autoregressive Semiparametric Geoadditive Models), which address the three issues simultaneously. We also illustrate the relative performance of these methods with an application to the case of house prices in the Lucas County.     

Financial Liberalisation and Economic Development: An Assessment

Abstract.  The financial sector has always played a central role in economic development, but analysis of its precise role has been hampered by the emphasis on 'real' factors in the main stream of economic thought and the static nature of financial theory. Empirical studies confirm the importance of finance to economic development, but are indecisive on the efficaciousness of the widely advocated policies associated with financial liberalisation. To be successful, strategies for financial liberalisation must deal with problems generated by asymmetric information and have policies to promote competition, the disclosure of information and the maintenance of governmental integrity.     

News and intraday jumps: Evidence from regularization and class imbalance

We study how information provokes intraday price jumps taking into account, besides news timing, the sentiment of news stories and other high-frequency indicators. By applying penalized logistic regression and addressing the rare nature of jumps, in addition to the previous evidence showing that causes of jumps are rate decisions and earnings announcements, we find that news provoking jumps is often followed by other news about the same company, that news stories sentiment and macro-surprises sign help to predict the jump sign, and, finally, that market players sometimes anticipate company-specific news.     

金融发展的角力：金融集聚与金融排斥的非对称空间溢出效应分析

中国区域经济发展差异不仅体现在东西之间与南北之间,相邻地区的发展差异也尤为突出,而金融发展中集聚与排斥效应的角力是不可忽视的因素。本文通过检验2004—2018年31个省份金融集聚与金融排斥对经济增长的影响,发现金融集聚与金融排斥存在非对称空间溢出效应：相较于金融集聚,金融排斥的负向溢出效应更为显著,但是金融集聚能够有效缓解金融排斥对经济增长的负向作用。进一步剖析发现,在相邻地区金融资源的势差分布中,金融集聚的虹吸效应激发了金融排斥,由此形成非对称空间溢出效应,并且这种效应具有长期性特征,在人口密度较高的地区较为显著。此外,金融集聚的溢出效应源于金融效率的优化,金融排斥的溢出效应源自深化地理排斥、评估排斥和条件排斥。本文研究结论为解决中国区域经济协调发展中存在的不平衡问题、增强区域经济增长动力提供有益的政策启示。     

Financial innovation and bank behavior: Evidence from credit markets

This paper investigates whether, and through which channel, the active use of credit derivatives changes bank behavior in the credit market, and how this channel was affected by the crisis of 2007–2009. Our principal finding is that banks with larger gross positions in credit derivatives charge significantly lower corporate loan spreads, while banks׳ net positions are not consistently related to loan pricing. We argue that this is consistent with banks passing on risk management benefits to corporate borrowers but not with alternative channels through which credit derivative use may affect loan pricing. We also find that the magnitude of the risk management effect remained unchanged during the crisis period of 2007–2009. In addition, banks with larger gross positions in credit derivatives cut their lending by less than other banks during the crisis and have consistently lower loan charge-offs. In sum, our study is suggestive of significant risk management benefits from financial innovations that persist under adverse conditions – that is, when they matter most.     

Air service and urban growth: Evidence from a quasi-natural policy experiment

While significant work has been done to examine the determinants of regional development, there is little evidence on the role of air services. This paper exploits the large and swift changes to air traffic induced by the 1978 Airline Deregulation Act to identify the link between air traffic and local economic growth. Using data for 263 Metropolitan Statistical Areas (MSAs) over a two-decade time period, we estimate the effects of airline traffic on local population, income, and employment growth. Our most conservative estimates suggest that a 50-percent increase in an average city’s air traffic growth rate generates an additional stream of income over a 20-year period equal to 7.4 percent of real GDP, the equivalent of $523.3 million in 1978 dollars.     

What factor contributes to productivity growth of Chinese city banks: The role of regional difference

This study pays more attentions to investigate the performance of Chinese city banks, which can make up the blanks large banks left in the financing market, further improving local economic development. The study modifies the profit productivity indicator of Juo et al. (2015) under the short-run assumption to measure the profit productivity and its components. Our study finds that there exists a significant difference among banks by regions, and the eastern regional city banks have a best profit efficiency, but decline more than the others. The decomposed component, price effect, plays a most important role to explain the profit productivity change.     

Public cluster policy and firm performance: evaluating spillover effects across industries

ABSTRACT

While the direct positive effects of public cluster policy on subsidized industries are beyond controversy, the impact of such policy interventions on non-subsidized industries within the same region, that is, the indirect effect of public cluster policy, remains vague and unexplored. This study examines the impact of a prominent public cluster policy in Germany, the so-called Leading-Edge Cluster Competition. Based on a unique dataset, we analyse the spillover effects of this cluster policy initiative on those firms and industries, which have not been the primary target of the cluster policy. Our results suggest that public cluster policy seems to have an indirect negative effect on firms that have not primarily been related to the targeted industries; therefore, the concept of ‘agglomeration shadows’ might also apply to industries and related firms. Despite the existence of knowledge flows induced by additional governmental funding within a region, non-subsidized industries, that is, non-targeted firms, seem to be unable to compete against targeted industries and, therefore, suffer from a lack of human, financial and social capital. Based on our findings, we propose policy recommendations on how to best identify policy instruments aimed at augmenting innovation-driven growth across a broad spectrum of industries and regions.     

Financial development and governance: A panel data analysis incorporating cross-sectional dependence

This study investigates bidirectional causality between governance and financial development using panel data of 101 countries from 1984 to 2013. The financial development–governance nexus is explored using econometric methods robust to cross-sectional dependence, and the relationship between different levels of development and openness is analyzed. Long-run equation estimates show clear evidence that financial development positively affects governance, and this positive impact is found to be robust to three different measures of governance. Further analysis shows that improving governance quality has a positive effect on financial development, while Granger causality tests demonstrate bidirectional causality between financial development and the governance measures. Finally, the impact of financial development on governance is dependent on a country’s level of development and openness. These findings underscore the crucial role of financial development in bringing about good governance reforms and economic growth that, in turn, can further develop the financial sector. As such, a symbiotic and synergistic relationship can persist between good governance, growth, and financial development. The findings provide significant motivation for policymakers to encourage openness and financial sector development to lift the standard of living, especially in emerging economies.     

City size and urban labor productivity in China: New evidence from spatial city-level panel data analysis

The previous literature has generally found that most Chinese cities were undersized in the 1990s. However, little is known about how urban agglomeration in China has evolved since the country began to experience much faster urbanization and deep marketization after 2000. Based on panel data of 281 cities between 2000 and 2013, our spatial panel data regression results show that the scale impact of city size on urban productivity appears to have an inverted U shape, and its effect will grow when the cities’ industrial structure becomes more dominated by the service sector. There are also significant spatial interactions and spatial heterogeneity of urban agglomeration among Chinese cities. Furthermore, we compute the optimal size for each city and find that most Chinese cities are still undersized in recent years. Based on our findings, we argue that the Chinese government should focus on promoting sufficient growth of medium sized cities in its new urbanization strategy.     

Trust or bust: Growth effects of knowledge,human and social capital revisited

Social capital consists of trust, collective values, and shared norms. It helps society to work efficiently and, hence, promotes knowledge accumulation and growth. This paper identifies the contribution of social capital to differences in total factor productivity among European subnational regions, but, unlike other studies, it focuses on the effects of interregional differences in social capital. To do so, the paper employs a spatial Durbin model of a social-capital extended Cobb-Douglas production function. Our results suggest that transfers of knowledge might be secondary to the presence of collectivism and human capital in knowledge-generating regions. Although knowledge can cross boundaries, an absence of skills and trust limits local growth capacity. Our estimations also suggest the presence of gravity effects emanating from social and human capital in which some regions lose against others nearby that have more abundant social and human capital.     

Risk spillover analysis across worldwide ESG stock markets: New evidence from the frequency-domain

With the increasing global awareness of green environmental protection, the international environmental, social, and governance (ESG) stock markets are developing rapidly together with rising risk linkages across worldwide markets. Therefore, this study explores the risk spillover characteristics of international ESG stock markets in the time and frequency domains and constructs a risk linkage network to further explore the risk contagion mechanism. The results show that in most cases, the developed North American market is the core of outward risk spillover in international ESG stock markets. The entire system presents a small-world structure, and the internal regions display different risk spillover characteristics. Moreover, international ESG markets generally have strong time–frequency spillover and medium-frequency (a month to a year) spillover. In contrast, the high- (a day to a month) and low-frequency (more than one year) spillovers are located at relatively low levels, but they will rise significantly under sudden financial events. The empirical results expand the ESG stock market's theoretical framework and provide a reference for investors and market regulators to reduce the investment risk of ESG.     

Order Imbalance,Liquidity, and Market Efficiency: Evidence from the Chinese Stock Market

We used data from the Chinese stock market to quantify the amount of time for the market to converge to efficiency. Order imbalance may predict returns when there is no designated market maker. In spite of availability of the direction of trade information in the Chinese stock market, it takes longer for information regarding order imbalance to be incorporated into stock prices in China than in the USA. With information on past returns and order imbalance, it takes between 15 and 30 min to converge to efficiency in the Chinese stock market. The process of converging to efficiency depends highly on liquidity. Copyright © 2011 John Wiley & Sons, Ltd.     

中国1978～2002年的财政制度、经济增长与转轨:理论与事实

本文在回顾中国经济转轨的历史上,运用动态最优化和博弈论研究了财政制度对中国经济增长和经济转轨的影响,并结合1978～2002年的数据进行描述性分析和统计检验。本文结论认为：中央政府的经济改革从国有企业开始源于经济增长和财政两个方面的原因;在1986-1993年中央政府长期背负财政赤字是1990-1993年通货膨胀的根本原因;“分税制”改革最直接的结果是中央政府宏观调控能力的提高,也影响着货币政策和国有银行改革。     

Equity market and money supply spillovers and economic growth in BRICS economies: A global vector autoregressive approach

Previous studies report that private credit as a proxy of financial development contributes to economic growth in BRICS economies. This paper employs three additional measures of financial development, namely equity market, money supply and market capitalization, and further investigates cross-country evidence on the impact of equity market and money supply spillovers on economic growth in BRICS economies. Utilizing a Global Vector Autoregressive (GVAR) framework and quarterly data from 1989Q1 and to 2012Q4 from BRICS economies, we find that equity market and money supply variables do not predict the contributions of financial development in each BRICS member in boosting economic growth in the other member countries. However, market capitalization significantly influences economic growth. These results suggest that, besides private credit, market capitalization is another key channel of promoting growth in individual economies and the region. Policy implications of the findings are discussed.