Autonomy and Effectiveness of Chinese Monetary Policy under the De Facto Fixed Exchange Rate System

This paper uses monthly data to examine the autonomy and effectiveness of monetary policy in China under the de facto fixed exchange rate arrangement in place from 1998 to 2005. The results obtained from Granger causality tests in a vector autoregression framework indicate that： （i） China actually conducted independent monetary policy during the fixed exchange rate period; and （ii） market-oriented policy measures are impotent in influencing real output and prices. The framework of the investigation into the autonomy of monetary policy adapts to the Chinese economic condition that primary loan and deposit rates are set by the central bank. Based on the empirical results, the present paper provides alternative strategies to improve the effectiveness of monetary policy in China, including developing the financial system and solidifying microeconomic fundamentals instead of forcing the adaptation of a more flexible exchange rate regime.     

Financial Market Turmoil： Implications for Monetary Policy Transmission in China

The recent financial market turmoil has initiated another search for insightful understanding of the interactions between the financial market and monetary policy. This paper explores these interactions in terms of the transmission mechanism of monetary policy in China. We argue that evolving financial development, enhanced by the expansion of the financial market, has altered the conventional channel for monetary transmission in China. Analyzing marked changes in the financial landscape and taking into account policy regime shifts in China, the paper provides clear evidence showing that the financial market has become a new and important channel for transmission of monetary policy in China.     

2003年以来中国的宏观经济形势分析

The Chinese economy has emerged from deflation and entered a new stage of economic growth in late 2002 and early 2003. The sudden pick up of the economy has led to a worsening of structural imbalance and inflation is rising. The Chinese government has to find a fine trade-off between growth and inflation. While the central bank needs to tighten its monetary policy, the government may need to use a more expansionary fiscal policy to offset the contracting effect created by the tightened monetary policy. The structural imbalance and partial overheating remind us that China‘s economic reform still has a long way to go. The Chinese government must speed up its reform process. While the long-term prospect for China‘s economic rise is promising, it may be necessary for the Chinese people to prepare themselves for a harder time ahead.     

Inflation Uncertainty and Monetary Policy in China

This paper uses a stochastic volatility model structural break tests with unknown point, and a counterfactual simulation method to discuss the significant decline in inflation uncertainty in China over 1978-2009. We attempt to quantify the contributions of better monetary policy and smaller structural shocks （including demand, supply and policy impacts） on the reduced inflation uncertainty. Empirical results in the present paper suggest that improved monetary policy accounts for only a small fraction of the reduction in inflation uncertainty from the pre-1997 period to the post-1997 period in China. The bulk of the significant moderation in inflation uncertainty arises from smaller shocks. This finding indicates that the quiescence of inflation in China over the past decade could well be followed by a return to a more turbulent inflation era. Therefore, the use of preemptive monetary policy to anchor inflationary expectations and keep moderate inflation uncertainty is warranted.     

Executive Compensation： Pay-for-Performance in High-Technology Firms

This study examines the relationship between corporate performance and the Chief Executive Officer （CEO） compensation in high-technology firms in the S＆P 500. The total short- and long-term CEO compensation in high-technology was compared with other industrial sectors from standard classification codes and tested in terms of corporate performance. The ExecuComp database was used to find the variables and to create a sample of firms between 2004 and 2010. Important corporate performance variables are used in this work, such as assets, employees, sales, net income, and earnings per share （EPS）, as reported by the firms for each year. A panel data GLS with a fixed effect model for time is estimated that describes total compensation for the period between 2004 and 2010. The result was aligned with the theory of executive compensations to address agency problems and to examine CEO pay-for-performance. The main objective of this paper is to consistently demonstrate that the performance is determined for the total CEO compensation for short- and long-term periods and to examine whether the total remunergttion paid to CEOs in high-technology firms in the S＆P 500 is related to corporate finance. This work provides a better understanding of the relationship between compensation and performance in high-technology firms. Results suggest that high-tech firms tend to use more sophisticated performance measurements to determine CEO compensation.     

A Lesson Learned from the Comparison of Bank Interest Rate in US and UK

According to the interest board, the current account interest and the loan interest rate vary from banks to countries. Both the current account interest and loan interest of US banks are lower than those of UK banks. And the spread between the two interest rates is greater in UK than that in US. Why is that？ The central banks base rates are always the reference interest rates for other banks when setting up the interest rates of their own. And the economy situation in that country may be a factor that affects the spread. Moreover, these two aspects link to each other. In this paper, we will look deeply into the economic situation and the pattern of change in the central bank interest rates in US and UK, hopefully we can bum a light to figure out the trend of change in bank interest rates.     

Effectiveness of Capital Controls and Sterilizations in China

Since 2003, China has been facing a trilemma of determining how to maintain independent monetary policy and limit exchange rate flexibility simultaneously, while facing persistent and substantial international capital flows. The present paper is an empirical evaluation of the effectiveness of China＇s sterilizations and capital mobility regulations, measured by sterilization and offset coefficients, respectively, using monthly data between mid-1999 and March 2009. We find that the effectiveness of China＇s sterilizations is almost perfect in terms of the monetary base, but not in terms of M2, and that China＇s capital controls still work but are not quite effective. Recursive estimation reveals that increasing mobility of capital flows and decreasing effectiveness of sterilizations might undercut China＇s ability to maintain monetary autonomy and domestic currency stability simultaneously. To solve the trilemma smoothly, China＇s monetary authority should continue to relax the management of the exchange rate, and take further steps towards deregulation of capital outflows.     

Anomaly in China＇s Dollar-RMB

Newly-established data on onshore deliverable US dollar-RMB forwards and the Shanghai lnterbank Offered Rate from Oetober 2006 to April 2009 reveal significant violations of covered interest rate parity. This paper explains the cause of this anomaly. Deviations in the forward market are caused by an increase in US dollar-to-RMB conversion restrictions. Given that Chinese monetary authorities want to prevent market participants from taking advantage of the predictable appreciation of the RMB, China＇s State Administration of Foreign Exchange has to tighten up the control on US dollar-to-RMB conversions. Under the tightened conversion restrictions, similar deviations will resurface in the forward market whenever hot money inflow increases. One way to avoid covered interest rate parity violations in the forward market is to decrease hot money inflow into China by maintaining a stable and credible exchange rate policy.     

Impact of Foreign Bank Entry on the Performance of Chinese Banks

This study investigates how foreign bank/investor penetrations influence local bank performance in China. At the country level, foreign bank penetration is proxied by MacroFP, measured by the percentage of banks with foreign strategic investors （FSI） among total banks. At the bank level foreign bank penetration is proxied by MicroFP, measured by the percentage shareholding of FSl in a bank. When foreign bank penetration is proxied by MacroFP, it is found to improve the profitability of local banks but not to reduce costs. Next, when foreign bank penetration is proxied by MicroFP, it is found to affect neither profitability nor costs. In sum, the present study demonstrates that the opening-up policy is correct from a macro perspective, However, for banks that have introduced FSI, determining the reasons for improvements in performance being inhibited is more important than releasing more shares to foreign investors.     

Business Cycle in China since the Lehman Crisis： Interaction among Macroeconomic Policy,Economic Growth and Inflation

The major objectives of China＇s macroeconomic policy are to stabilize economic growth and inflation, which, in turn, are important factors determining key prices, such as the policy interest rate, the renminbi exchange rate and stockprices. In a framework that distinguishes different phases of the business cycle based on whether the current period＇s economic growth rate and inflation rate are above or below their ＂＇normal＂ values, this paper analyzes the interaction among macroeconomic policy, economic growth and inflation in China since the Lehman crisis, and the implications for these key prices. The path of China＇s economy indicates that stimulus measures taken by the government during the recession phase and tightening measures implemented during the overheating phase have helped minimize the fluctuation over the business cycle. Our analysis shows that Chinese authorities tend to rely more on adjusting the exchange rate than the interest rate to stabilize the economy. Comparing with conditions at the time of the post-Lehman recession, the current slowpace of economie growth in China may reflect not only weakening demand, but also a lowerpotential growth rate associated with the arrival of the Lewis turning point.     

Exporting National Champions： China＇s Outward Foreign Direct Investment Finance in Comparative Perspective

We examine the extent to which Chinese development banks have financed the globalization of China＇s ＂national champion ＂firms： specifically, through outward foreign direct investment （OFDI）. We create a database of Chinese fnance for OFDI and compare our results to the existing literature and available data on Japan, Korea and other Asian nations. We estimate the total value of China＇s OFDI finance from 2002 to 2012 at US$14Obn. As a percentage of total OFDI, China＇s lending is roughly three times higher than Japan ＇s, the previous global leader in OFDl finance. We identify two major reasons for China＇s high （31 percent） ratio of OFDl lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are statelowned so it can more easily channel funds to targeted areas. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea.     

What Causes China＇s High Inflation？ A Threshold Structural Vector Autoregression Analysis

China＇s astonishing economic growth implies a necessity to understand its inflation. The present paper employs threshold nonrecursive structural vector autoregression analysis to explore the asymmetric effects of macro-variables on inflation in low and high inflation regimes. The empirical evidence demonstrates, first, that the reactions of inflation to various shocks are inflation-regime-dependent and asymmetric. Second, monetary policy influences China ＂s high inflation and adjusting the domestic interest rate in China may be an effective way to control inflation in a high inflation regime, but not in a low inflation regime. In a high inflation regime, a high inflation rate may cause the macro-policy authorities to increase the domestic interest rate, in an attempt to stabilize high inflation. Third, contrary to expectations, the world oil price is not a strong cost-push factor in a low inflation regime. Oil price increases may increase inflation in a high inflation regime, but there is no such obvious effect in a low inflation regime. Finally, China ＂s nominal effective exchange rate influences inflation in both low and high inflation regimes. A nominal effeetive exchange rate appreciation might be effective in controlling domestic inflation in both regimes.     

Tax Rebate and Dividend Payout in Bangladesh

The purpose of this paper is to examine the effects of the introduction of 20% tax rebate in 2002 for certain firms on the dividend policy of firms potentially qualifying for this rebate in Bangladesh. A balanced panel data set of 63 non-financial firms of Bangladesh for 14 （1998-2011） years from the Dhaka stock exchange is used for this purpose Newey-West estimator is used to estimate a logit model and the specified model uses binary values of 0 and 1 to identify if it met the tax rebate threshold. The explanatory variables are finn size, log of market value to face value ratio and profitability. A dummy variable was used to separate the pre-rebate period （2003 and before） from post-rebate period （after 2003）. The dummy variable turned out to be insignificant indicating that introduction of the tax rebate had no impact on dividend policy of qualifying firms.     

Choosing an Appropriate Exchange Rate System for Developing Countries

The developing countries emerging market crisis during the second half of 1990s has had a major impact on changing the views of academicians, policy designers and developing countries＇ authorities with respect to exchange rate policies, particularly after the Asian Financial Crisis in 1997. Although the Asian Financial Crisis has brought enormous damage to those hit countries, it left very precious lessons for the developing countries. Countries have to make a decision under uncertainty - they must choose an exchange-rate system and associated monetary policy without full information on the consequences of that choice. They must weigh the arguments and the costs of errors from adopting different exchange rates. They must evaluate the alleged benefits of each system and the opportunities for achieving those benefits through alternative, substitute means. They must also evaluate methods of reducing the potential costs of each system. It is true that no single exchange rate regime can. be prescribed as best for all, nor is the best choice of exchange rate regime always clears for all places in all times, even in light of their specific circumstances. There are no simple, universal answers. But under most circumstances and for most developing countries, one system of flexible exchange rate is better than others.     

Does Foreign Direct Investment Affect the Growth of Local Firms？ The Case of China＇s Electrical and Electronics Industry

Does foreign direct investment(FDI) into developing countries affect the growth of local firms in host countries? Using a dataset of 38 sectors in China’s electrical and electronics industry,in this paper,we analyze whether FDI has a positive effect on local firms,with technology spillovers,added value and increasing total factor productivity,or a negative, market stealing,effect.Estimating the relationship between growth of local firms and investment of foreign firms,our results show that FDI is likely to have a negative impact on the growth of local firms in sectors with large disparities in technology and less experience in business.Therefore,local firms lacking in technology need to find markets with no competition from foreign firms or determine strategies to compensate technology disparities.     

我国前瞻性货币供给规则与宏观经济的稳定我国前瞻性货币供给规则与宏观经济的稳定性——拓展的MIU模型与中国经验

国内研究货币规则的文献大多依据＂损失函数最小化＂标准获得货币政策工具的决策准则,而鲜有从一般均衡模型不动点性质的角度评析我国货币政策规则的文章。本文将一个适用于我国转型时期的货币量规则引入一般均衡的MIU模型,拓展了传统的固定货币增长率的货币经济学模型。文章发现：消费者微观偏好和央行货币政策参数会对宏观经济系统的稳定性产生影响。数据分析显示：我国经济系统获致的不动点为鞍点,即存在一条稳定的轨迹使经济系统收敛于均衡状态。文章建议,货币政策部门密切关注居民微观行为演进和央行货币规则微调对经济系统动态特性产生的影响。

Abstract：

Most domestic literatures on monetary rules are based upon the standard of ＂loss function minimization＂ to get access to the decision-making guidelines regarding monetary policy tools.While,little article looks the problem concerning the assessment of China＇s monetary policy rule from the angle of fixed point nature in the general equilibrium model.This paper introduces a monetary policy rule compatible with our transitional reform period into a general equilibrium MIU model,which is extended from the traditional fixed-money-growth-rate model.This article argues that：micro-parameters of Consumer preferences and the central bank＇s monetary policy have great impact on macroeconomic stability.Further-more,we put forward three testable propositions.According to macro-level data from China,we find that：Our economic system has a saddle-point equilibria,that is to say,there exists a stable trajectory that the economy will converge to this equilibria.The paper suggests that our monetary policy-makers should pay close attention to the micro—behavior evolution of our residents and the monetary regime changes,which will have significant impact on the dynamic characteristics of our economy.     

The Money Demand in China ——A Dynamic Adjustment Model

1. Introduction Since the Chinese economic reform started in 1978, its economy has gone through several episodes of high inflation and deflation. The determination of inflation has always been the debate of scholars as well as policy makers. The financial reform since 1984 made the People＇s Bank of China and the central bank rely more on the monetary aggregates as the policy instruments to control inflation. In January 1998, the Central Bank of China decided to completely replace the previous operational policy of controlling bank credit with the use of market based policy instruments. As the reform deepens, researchers speculate that the money market becomes relatively more efficient than before.     

Low Inflation,Pass-through,and a Discrete Inflation-targeting Framework for Monetary Policy in China

The performance of inflation in China over the past few decades has been remarkable. This paper characterizes the statistical nature of the inflation series in China over the past quarter of a century and presents an interesting scenario of large decline in inflation pass-through accompanied with low inflation since the end of the 1990s. How should monetary policy in China be conducted under these new economic conditions? We propose a discrete inflation-targeting framework for monetary policy,which is likely to be suitable for the regime of low inflation and inflation pass-through. The advantages and caveats of adopting such a framework are also discussed.     

Market reaction on convertible bonds offering： An agency cost of free cash flow perspective

By investigating ＂announcement effects＂ of 48 CBS and 439 pure equity offering in Chinese A-share listed companies, this paper finds that, in general, convertible bonds issue announcement may elicit a negative stock price response, firms with convertible bonds issue announcement experience significantly higher mean of abnormal returns than firms with equity issue announcement, and the fallen stock price is positively related to offering size, and negatively related to debt/asset ratio. Further, we find those firms with less undistributed cash flow and more growth opportunity experience significantly higher price response than firms with more undistributed cash flow and less growth opportunity. The empirical evidence consists with the predictions of the agency costs of free cash flow theory.     

Minimum Wage Regulation in China and Its Applications to Migrant Workers in the Urban Labor Market

Using data at micro and city levels, the present paper explores the policy evolution of the minimum wage system in China, and examines its coverage for migrant workers. The analysis indicates that minimum wage policy has been substantially improved in terms of both coverage and the level of the minimum wage standard, but that the current policy tool that relies on the monthly wage rate is not effective. Because migrant workers tend to work more hours, use of an hourly wage rate is more appropriate than a monthly wage rate.