The impact of coal price fluctuations on China’s economic output

Due to the important role of coal in China’s macroeconomic growth, the price of coal significantly influences its economic output. Employing a VAR model, a cointegration test and a state-space model of time-varying variables, this article analyses the influence of coal price fluctuations on the volume and structure of China’s economic output, including both the strength and the time delay of such influence. This article further explores the corresponding relationships between coal price fluctuations and variations in the effects of these fluctuations to analyse the asymmetric influence of coal price fluctuations on China’s macroeconomy. Coal price fluctuations exerted significant long-term positive effects and short-term negative effects on China’s output variables, with an average delay of 11 months; they had positive effects on investment and consumption over the long term and an increasingly negative effect on imports and exports. The average delays were 9 months for investment, 6.5 months for consumption and 10 months for imports and exports. There was an asymmetric correlation between coal price fluctuations and the time-varying elasticity of their impact on GDP. The results in this study are consistent with the actual operating circumstances of the Chinese economy.     

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 changing US–China investment relationship

The United States and China are at a turning point in their investment relationship. China’s previous investments in the United States were predominantly in government securities, while other holdings were negligible. Recently, the accumulation of treasury securities has slowed and direct investments by Chinese firms have risen steeply, with Beijing signaling greater support for portfolio investment outflows as well. This article describes the nascent shift in patterns of Chinese investment in the United States and uses the case of direct investment to examine the implications for US–China relations. We discuss current and future policy issues presented by Chinese foreign direct investment (FDI) in the United States, including national security, market access, and antitrust.     

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.     

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.     

The allocation of China’s higher education talent (2003–2013)

Using the job placement data of college graduates, we document the allocation of college-educated skilled labour in China during 2003 and 2013. We find that public sectors (governments and state-owned enterprises) enjoy a privileged position in absorbing the most talented in the labour market in contrast to the difficulties that domestic private enterprises suffer. The appeal of the public sectors does not come from the monetary salaries offered at the entry level.     

Gains and losses from potential bilateral US–China trade retaliation

Two closely related numerical general equilibrium models of world trade are used to analyze the potential consequences of US–China bilateral retaliation on trade flows and welfare. One is a conventional Armington trade model with five regions, the US, China, EU, Japan and the Rest of the World, and calibrated to a global 2009 micro consistent data set. The other is a modified version of this model with monetary non-neutrals and including China's trade surplus as an endogenous variable.Who may gain or loss from global trade conflicts spawned by adjustment pressures in the post crisis world is much debated. In a US–China trade conflict, Europe and Japan would seem gainers from preferential access to US and Chinese markets. The loss of markets would hurt the US, but moving closer to an optimal tariff could be the source of terms of trade gains. And the ease of substitution across trading partners' practices would determine costs for China.Results from the conventional model suggest that retaliation between the two countries can be welfare improving for the US as it substitutes expenditures into own goods and improve its terms of trade with non-retaliatory regions, while China and non-retaliatory regions may be adversely affected. Results in the endogenous trade surplus model from the central case model specification, however, suggest that both the US and the EU (the deficit regions) have welfare losses in most cases, while the surplus region, China, and the ROW have welfare gains. In both models, when the bilateral tariff rates are very high, gains accrue to the EU and Japan from trade diversion if the substitutions elasticities of imports are high. Costs are borne by the US and China in lost exports, lowered terms of trade and adjustment costs at home.     

Trade diversion effects of the US–China trade war on Vietnam

This paper empirically examines the US–China trade war that began in mid-2018, focusing on the impact on a third country, Vietnam. Using regression analysis, we found that while the trade war had a negative impact on US imports from China for all targeted products, there was a partial offset from increased imports from other countries. Notably, US imports from Vietnam experienced a sharp increase, particularly after the third round of US import tariffs on Chinese goods. Additionally, our research reveals that the four rounds of tariff escalation affected US imports from China differently depending on their end-use and technology intensity.     

The Geopolitics of China’s Maritime Silk Road Initiative

China’s “One Belt, One Road” project is comprised of two components: the Maritime Silk Road Initiative (MSRI) and the Silk Road Economic Belt (SREB)—that were announced separately in 2013. Each component has the potential to transform the global geopolitical landscape through the construction of interrelated infrastructure projects including ports, highways, railways and pipelines. Such hard infrastructure requires the complementary construction of soft infrastructure, such as free trade and investment agreements, and other accords. We introduce a special section focusing specifically on the geopolitics of the MSRI that stems from a workshop hosted in November 2015 in Shanghai. The origins, scope and content of the MSRI are described, along with a summary of the current literature discussing the project, and dominant geopolitical representations. The MSRI is a geopolitical project that involves a number of actors (governments, private companies and Chinese state-owned enterprises) at a number of geographic scales (cities, provinces, states and continents). Arrghi’s twin logics of territorial and economic power help frame and connect the papers of the special section to illustrate the complexity and dynamism of the geopolitics of the MSRI. The articles provide insights into the geopolitics of a large connectivity project.     

The (small) blessing of foreign aid: further evidence on aid’s impact on democracy

In an empirical contribution to the literature of foreign aid, we estimate the impact of foreign aid on democracy in a panel of 93 developing economies during 1971–2010. We find that foreign aid promotes democracy, with the result robust to different estimation methodologies and control variables and to instrumenting for foreign aid.     

The impact of mobile financial services’ usage on microfinance delinquency

This paper studies the impact of Mobile Financial Systems’ usage on microcredit delinquency ratios in Tunisia by using either a two-part model or matching econometric procedures. Our large dataset contains all of the administrative registers that belong to the six branches of Enda, the incumbent Institution leader in Tunisia. We find a significant reduction of 4.92 days of late repayment for an average user of MFS in an environment where 15% of loans have been paid late at least once. We foresee a tremendous opportunity to improve the MFIs’ repayment ratios and, consequently, provide microcredit customers with more financing for income generating activities.     

The impact of skilled immigrants on their local teammates’ performance

We use the Bosman ruling, which invalidated restrictions on the maximum number of foreign players allowed on professional football teams, to identify a causal positive impact of foreign players in German Bundesliga clubs on the individual performance of their domestic teammates.     

Research on China’s export structure to the US: Analysis based on the US economic growth and exchange rate

Due to the rapid appreciation of RMB, the consistent declining of the US economy and other uncertain factors, China’s export volume to the United States has declined. The paper first chooses six industries to divide them into three groups based on per capita possession of capital, then employs the monthly data from 2001 to 2008 to carry out EG two-step cointegration test, and finally analyzes the impacts of the US economic growth and the exchange rate variability on different export industries. Empirical results show that the labor-intensive industries are most susceptible to fluctuations brought by economic growth and real exchange rate, while those industries with higher per capita possession of capital are less susceptible to external factors. In the short run, the export of labor-intensive products gives an advantage to China’s foreign trade development, but in the long-run, these industries will be affected greatly by various uncertain factors and the advantages of China’s labor-intensive export industries will disappear with the shift of the international division. Therefore, the only way to guarantee the dominant position of China’s foreign trade is to develop capital and technology intensive export industries and upgrade export structure.     

The effect of communication and energy services reform on manufacturing firms’ innovation

Upstream services liberalization improves the efficiency and cost of communication and energy services, reducing the marginal costs of downstream manufacturing firms through input-output linkages. This study explores one possible mechanism behind this finding: innovation. I investigate the effects of communication and energy services reform in India in the mid-1990s on downstream manufacturing firms’ decisions to invest in R&D. The empirical analysis uses manufacturing-firm level data and regulation indicators in the communications and energy service sectors. The liberalization of services in India had a positive effect on manufacturing-firm innovation. These results are concentrated on firms in the middle of the initial productivity distribution. The main channel is the elimination of entry barriers into the communication sector.     

Multivariate filter estimation and ARDL model analysis of China’s potential output

In this article, we apply a new multivariate filter approach to estimate China’s potential output. Furthermore, we build an ARDL model to analyse the influence on potential growth caused by important factors that contribute to estimation and China’s development. Our results show that the current economic slowdown is not a cyclical phenomenon and China’s potential growth has declined since 2010. We also show that fixed asset investment and trade, which have a long-run relationship with potential output, exert negative long-run effect on potential growth justifying the implementation of China’s recent supply-side reforms.     

The impact of regional trade policy uncertainty on the productivity of Chinese export enterprises: The case of China–ASEAN Free Trade Area

Reduction of regional trade policy uncertainty is critical for promoting Chinese export enterprise productivity and will help the economy enter the high-quality development stage. We use the case of the China–ASEAN Free Trade Area to empirically tests the impact of the reduction of regional trade policy uncertainty on the productivity of Chinese export enterprises. We apply the difference-in-difference method to micro-enterprise level data from the “China industrial enterprise database” and “China Customs enterprise database” for 2007–2013. Our analysis and results show that establishing the China–ASEAN Free Trade Area has dramatically reduced regional trade policy uncertainty, significantly impacting the productivity of Chinese enterprises exporting to ASEAN. The results also show that enterprises with different ownership types, regions, factor density, and pollution emission intensity show significant heterogeneity in the level of productivity improvement. Applying a mechanism test, we found that the promotion of productivity from a reduction of regional trade policy uncertainty is achieved through the learning effect, the competition effect, and improving the trade environment of imported intermediate goods. The learning effect mechanism has the highest contribution, accounting for 39.01% of the net effect. The empirical results provide novel insight into promoting the productivity of Chinese enterprises exporting to ASEAN from the perspective of reducing regional trade policy uncertainty.     

The impact of NCAA men’s basketball probations on the quantity and quality of student applications and enrollment

Collegiate sports programmes have been characterized as the front porch of a university, serving to publicize the institution and draw students to the door. Previous research in this area has indicated a positive correlation between athletic success and the quantity and quality of students attending the university. Conversely, we seek to analyse if athletic malfeasance, as measured by NCAA probations of men’s basketball programmes, negatively affects either the quantity or quality of students at a university. Our findings suggest that while basketball probations do not change the overall quantity of applications nor enrolment at a university, there is a significant adverse impact on the quality of freshman enrolling at the university as measured by Scholastic Aptitude Test scores. Our finding suggests that athletics do indeed serve as a front porch to a university and that athletic sanctions in men’s basketball have a detrimental effect on the average quality of students attending a university.     

The effects of inflation targeting on Okun’s law

This article provides the first empirical evidence that the adoption of inflation targeting (IT) matters for the extent of tradeoff between unemployment and output, that is Okun’s law. Our full sample results indicate that IT leads to a more negative Okun’s coefficient, suggesting that, for a given reduction of output, the introduction of IT is associated with a higher unemployment rate. Subsample analyses reveal that the whole sample results are mainly driven by the industrial subsample outcomes, not the developing counterparts. Our findings point out that IT not only influences macroeconomic variables per se but also affects the relationship between/among macroeconomic variables.