Price Fluctuations and Growth Patterns in Singapore's Trade, 1831–1913

Using a newly created trade price index, this paper determines the real growth rate of Singapore's trade during 1831–1913. We find that Singapore's trade grew between 1831 and 1873 at a higher rate than during the later period. An analysis of the terms of trade and purchasing power parity reveals that the growth pattern of Singapore's entrepôt trade changed after 1850 from growth fuelled by transit trade of industrial products to balanced growth between regional imports and exports. This change resulted from the operation of the international monetary system, which enhanced market integration between Britain and Southeast Asia via Singapore.     

Hypergrowth in an East Asian NIC: Public policy and capital accumulation in Singapore

Singapore has produced the world's highest investment ratios, known to account for growth more rapid than in any other less-developed country over the past three decades, but such high investment needs explanation. We trace Singapore's public policy of increasing tax concessions and infrastructural spending—in effect subsidies to private firms—and use an open-economy, neoclassical model to show how, by attracting “footloose” foreign capital and raising investment levels, these policy measures can drive growth. The consequent transformation of living standards in Singapore suggests, in accordance with theory but contrary to most practice, that for some less-developed countries effectively zero tax on foreign direct investment may be a beneficial strategy. Yet for both Singapore and other would-be late industrializers, major issues of development strategy arise from the kind of input-driven growth analyzed in this article.     

Singapore's Collective Bargaining in a Game of Wage and Exchange Rate Policies

In Singapore's system of tripartite collective bargaining, does the wage-policy maker consistently react optimally to the best move made by the exchange rate-policy maker (Nash-rule) or only to the state of economy (non-Nash rule)? This paper finds that the Nash-rule equilibrium is unstable and thus the non-Nash rule becomes more meaningful. Under the non-Nash rule, the simulated wage growth exhibits a counter-cyclical pattern and increases with the union of workers' bargaining power. The government's role appears to strike a balance between the interests of the employers' and the employees. Consistent with actual observations, the simulated exchange-rate appreciation has acted as a complement to wage growth from 1987 to 1995.

     

Singapore's Bilateral Merchandise Trade Linkages with Japan and the United States: Trends,Patterns and Comparisons*

This paper analyses and compares trends and patterns in Singapore's bilateral merchandise trade relations with its two largest trading partners, Japan and the United States (US). Over the period 1976–1992, the analyses reveal that both Japan and the US have been relatively over-represented as Singapore's trade partners. However, whereas Singapore's trade with Japan has become more intensive in recent years, that with the US has become less so. Computations reveal that the degree as well as level of Singapore's intra-industry trade with the US has exceeded that with Japan. Nevertheless, while the degree of Singapore's intra-industry trade with Japan has been consistently increasing since 1981, bilateral trade with the US since 1987 has become increasingly inter- rather than intra-industry. The important nexus between trade and FDI is also highlighted.     

Singapore's Perspectives on the Proliferation of RTAs in East Asia and Beyond

Abstract

In this article the viewpoints and adopted strategies of Singapore in managing its trading relationship with other countries in the world is discussed. Trade being the lifeline and basis for its economic survival, Singapore has been very active in the negotiation and establishment of Free Trade Agreements (FTAs) with countries, practically in every continent. Singapore's activism in bilateral FTAs is a reinforcement of its development strategy of expanding and ensuring market access for local and foreign investors. This is also in alignment with Singapore's pro- business strategy philosophy and the objective of ensuring economic viability. Also Singapore's trade accords go beyond trade liberalization and include “behind the border” impediments to trade; this is reckoned to keep the momentum of trade talk going and to hasten the process of liberalization by inducing other countries to liberalize.     

Macroeconomic policy-induced wealth effects on Chinese foreign housing investments

The unpegging of China's currency in 2005 creates positive wealth effects that trigger Chinese foreign buyers' responses to pay 3.42% more in housing prices relative to other foreign buyers. We find evidence of a higher propensity to purchase housing units with more visible features among Chinese foreign buyers after the policy shock relative to other foreign buyers. Chinese foreign buyers pay 11.0% premiums for high-floor units, 7.25% premiums for large units and 4.61% for luxury (more expensive) units after experiencing positive incomrtde shocks. We find that conspicuous consumption motives are augmented in high-income neighborhoods and neighborhoods with strong enclaves and social networks comprising residents from China. We show that conspicuous consumption motives are more significant for Chinese foreign buyers who are owner occupiers than for those who are investors. The results survive a slew of robustness and falsification tests, and we cannot reject the finding of wealth-induced conspicuous consumption by Chinese foreign buyers in Singapore's private housing market.     

Embracing globalization to promote industrialization: Insights from the development of Singapore's petrochemicals industry

Debates about industrial policy reveal disagreements on three salient issues. The first is whether government can overcome its own failures, namely knowledge constraints and rent-seeking, to correct market failures. The second is whether government should go beyond horizontal policies to adopt more activist interventions such as “winner-picking.” The third is whether intervention should follow or defy the country's comparative advantage. Singapore's experience in developing a globally competitive petrochemicals industry, within only a few decades and through vigorous interventions, provides meaningful insights into these debates and offers valuable lessons for developing countries. The lessons drawn from this paper suggest three fundamental principles for designing a promotion strategy and a strategic action framework for implementation.     

International bimetallism and silver absorption in Singapore, 1840–73

This study reveals the mechanism underlying the silver trade in Singapore during the third quarter of the nineteenth century by analysing banking business and bullion arbitrage. After 1849, the California Gold Rush induced gold depreciation and silver appreciation in Singapore's bullion market, and arbitrage profits for silver imports from Britain emerged. At the same time, the expansion of banking business by eastern exchange banks enhanced the connectivity of Singapore's exchange market with London, and enabled bullion arbitrage between the two distant cities. As a result, there was an influx of silver from Britain. In addition, Dutch silver, which was exported to Java by the Netherlands after 1854, flowed into Singapore due to the unfavourable exchange policy of the Dutch government.     

China's FDI and non-FDI economies and the sustainability of future high Chinese growth

This paper presents and assesses of the contribution of inward FDI to China's recent rapid economic growth using a two stage growth accounting approach. Recent econometric literature focuses on testing whether Chinese growth depends on inward FDI rather than measuring the contribution. Foreign Invested Enterprises (FIEs), often (but not exclusively) are joint ventures between foreign companies and Chinese enterprises, and can be thought of as forming a distinctive subpart of the Chinese economy. These enterprises account for over 50% of China's exports and 60% of China's imports. Their share in Chinese GDP has been over 20% in the last two years, but they employ only 3% of the workforce, since their average labor productivity exceeds that of Non-FIEs by around 9:1. Their production is more heavily for export rather than the domestic market because FIEs provide access to both distribution systems abroad and product design for export markets. Our decomposition results indicate that China's FIEs may have contributed over 40% of China's economic growth in 2003 and 2004, and without this inward FDI, China's overall GDP growth rate could have been around 3.4 percentage points lower. We suggest that the sustainability of both China' export and overall economic growth may be questionable if inward FDI plateaus in the future.     

How would Capital Account Liberalization Affect China＇s Capital Flows and the Renminbi Real Exchange Rates？

In this paper we study the determinants of gross capital flows, project the size of China's international investment position in 2020, and analyze the implications for the renminbi real exchange rate if China liberalizes the capital account. We assume in this exercise that the renminbi will have largely achieved capital account convertibility by the end of the current decade, a timetable consistent with recent proposals by the People's Bank of China. Our analysis shows that if the capital account were liberalized, China's gross international investment position would grow significantly, and inflows and outflows would become much more balanced. The private sector would turn its net liability position into a balanced position, and the official sector would reduce its net asset position significantly, relative to the country's GDP. Because of the increasing importance of private sector foreign claims and the decreasing importance of official foreign reserves, China would be able to earn higher net investment income from abroad. Overall, China would continue to be a net creditor, with the net foreign asset position as a share of GDP remaining largely stable through this decade. These findings suggest that the renminbi real exchange rate would not be particularly sensitive to capital account liberalization as capital flows are expected to be two‐sided. The renminbi real exchange rate would likely be on a path of moderate appreciation as China is expected to maintain a sizeable growth differential with its trading partners.     

An Assessment of the Singapore Skills Development System: Does it Constitute a Viable Model for Other Developing Countries?

In this paper, we briefly describe the institutional background of Singapore's successful national skills development model. We devise a tentative framework to evaluate national level skills development efforts, and we use it to assess the Singapore model. We argue that the model has the potential to move constantly toward higher skills equilibria. We question however, the long-term sustainability of the model, and whether it is transferable to other developing countries. We conclude with some principles that other countries might use in organizing their own skills development systems.     

What happened to the world's potential growth after the 2008–2009 global financial crisis?

This paper provides estimates of potential growth for 52 economies in 2000–2018. We follow Borio et al.’s (2014, 2017) methodology, which takes into account the relationship between financial factors and the output gap. We find that the world's potential growth declined from an average of 3.0% in 2000–2007 to 2.6% in 2010–2018. Potential growth peaked before the crisis at 3.4% in 2006. The trough was in 2009 at 2.3%. Potential growth started recovering in 2010 and reached 2.9% in 2018. Decomposing the 0.4 percentage points decline between 2000–2007 and 2010–2018 by economy, we find that high-income Europe contributed 0.34 percentage points. The decline in potential growth in the United States contributed 0.24 percentage points, while the decline in Japan contributed just 0.07 percentage points. China's potential growth and that of Asia and the Pacific also fell, but their contributions to the change in the world's potential growth were positive, 0.33 percentage points and 0.11 percentage points, respectively. The other economies contributed 0.19 percentage points to the decline. Decomposing the sources of the decline into the contributions of labor force growth and labor productivity growth, the former declined by 0.55 percentage points, while labor productivity growth increased by 0.15 percentage points.     

Estimation of China's disaggregate import demand functions

We estimate the disaggregate import demand functions for three basic classes of goods as defined in the System of National Accounts (SNA): capital goods, intermediate inputs, and final consumption goods, and use the findings to shed light on the effects of China's economic growth on its current account. The results showed that as China switches from exports to domestic demand as a key driver for economic growth, China's trade surplus would be expected to shrink rather quickly.     

Why Has China's Current Account Balance Converged after the Global Financial Crisis?

China's current account surplus declined significantly from its peak of nearly 10 percent of GDP in 2007 to less than 1 percent in 2018. The new pattern offered fresh evidence for our understanding of China's current account dynamics. In this paper, we used flow of funds data to gauge its underlying driving forces. Specifically, by employing index decomposition analysis, we decomposed the current account from the perspective of savings and investment into three sectors: the household, corporate, and government sectors. We found that the decline in China's current account ratio was first driven by cyclical factors, i.e. weak corporate saving growth induced by the economic slump in 2009 as well as the following massive corporate investment bolstered by the government stimulus plan. However, such cyclical factors quickly subsided, and the subsequent current account balance reduction was later supported by structural factors, i.e. household savings declined enduringly and the Chinese government switched to a more expansionary fiscal policy. There are three possible explanations for the structural movement: reduced precautionary saving due to higher social security coverage ratio, lower corporate profits as a result of economic slowdown, and a twin deficit due to the government's more relaxed fiscal stance. The new facts, however, were not consistent with other current account theories focusing on long‐term aspects of the saving–investment account puzzle, especially those relating to China's special demographic characteristics.     

Output and productivity comparisons of the Singapore and Hong Kong wholesale and retail trade sectors, 2001–2008

This paper employs the industry of origin approach to compare value‐added and labour productivity of Singapore and Hong Kong's wholesale and retail sectors for the period 2001–08. The direct comparison between these two economies was motivated by the statement of the Singapore Government that its services sector, especially the retail sector, lagged behind Hong Kong's productivity levels. The results show that since 2005, Singapore's wholesale and retail sector performance in terms of labour productivity has been below Hong Kong's level, largely due to the poor performance of its retail sector arising from an influx of foreign workers. Results from total factor productivity analysis of these two economies also suggest that Hong Kong's better performance (since 2005) was largely due to its ability to employ more educated and trained workers with limited use of capital. The results suggest that polices that have worked in Hong Kong may not work in Singapore because its population is more diverse, which poses a challenge to policymakers in raising its productivity level.     

How Much Will China Save? Projecting China's National Savings Through 2040*

This paper projects China's national savings through 2040 based on China's national account data, demographic data, and data on rural and urban life‐cycle income and consumption. Our baseline projections show that China's national saving in 2040 will be 16 times the current national saving. The annual growth rate of wealth will decline from 16.3 percent in 2012 to 9.5 percent in 2040. Lowering the growth rate of wealth accumulation to the current rate of return to wealth increases consumption through 2040; lowering the growth rate of wealth further may increase consumption more in the short run, but less in the long run.     

THE EMERGENCE AND POLITICAL CONSCIOUSNESS OF THE MIDDLE CLASS IN SINGAPORE

Singapore is an example showing that economic development, the affluence it creates, the emergence of a large middle class do not inevitably lead to liberal democracy. This study examines the present situation and problem of Singapore's middle class. It first describes the emergence and the characteristics of this class. It then examines the political control of the People's Action Party government, which has crushed democratic movements in the bud, and the government's discriminatory policies, such as in education and housing, which favor the growing middle class. Lastly, it discusses new problems that are arising from the middle class's mammonism and resultant political passivity In conclusion, this study foresees that to keep the supply of material goods flowing to the middle class, the government will have to push for even greater economic development, which means that the role of the state in Singapore is likely to become even greater than before.     

Legal frameworks and credit information systems in China,Korea, and Singapore

We analyse the relationship between Public Credit Registries and Credit Bureaus in East Asia by observing credit information markets, in particular, in China, Singapore, and Korea. Singapore's credit information system consists of only a Credit Bureau. China and Korea have gone in different directions. Public Credit Registries play the role of credit information sharing in China, while Public Credit Registries and Credit Bureaus coexist in Korea. The results suggest an important relationship between the development of financial markets and credit information systems. The lower the income level and the heavier the government's hand in financial markets, the greater the need for Public Credit Registries; whereas, financial liberalisation and rising incomes encourage Credit Bureaus.     

Does GDP Distort Mexico's Economic Performance?

Between 1961 and 1980, Mexico's gross domestic product (GDP) per capita grew nearly 3.50% annually. During the 1980s, however, it shrank about 0.50% per year. GDP figures suggest that there was sustained economic growth for the 1960s and 1970s, changing suddenly to contraction in the 1980s. This impression may be misleading. GDP does not account for housework or informal production outside households. Further, GDP also may be distorted by transactional activities, which are expenditures to support transactions, not actual output consumed. This study recalculates output for Mexico for the 1961-1990 sample period, controlling for transactional activities and nonmarket production. We find that GDP misstates Mexico's “actual” economic growth. In the 1960s, the economy expanded more quickly than GDP suggests. But in the 1970s, growth was less than half that of the 1960s. The economy indeed slumped in the 1980s, but not as terribly as the official figures indicate. Mexico's economy did not collapse suddenly in the early 1980s; actual economic growth had slowed dramatically during the 1970s.     

An Evaluation of Friedman's Monetary Instability Hypothesis

In this article, I examine what I call Milton Friedman's Monetary Instability Hypothesis. Drawing on Friedman's work, I argue that there are two main components to this view. The first component is the idea that deviations between the public's demand for money and the supply of money are an important source of economic fluctuations. The second component of this view is that these deviations are primarily caused by fluctuations in the supply of money rather than the demand for money. Each of these components can be tested independently. To do so, I estimate an otherwise standard New Keynesian model, amended to include a money demand function consistent with Friedman's work and a money growth rule, for a period from 1875 to 1963. This structural model allows me to separately identify shocks to the money supply and shocks to money demand. I then use variance decompositions to assess the relative importance of shocks to the supply and demand for money. I find that shocks to the monetary base can account for up to 28% of the fluctuations in output whereas money demand shocks can account for less than 1% of such fluctuations. This provides support for Friedman's view.