Long memory volatility dependency,temporal aggregation and the Korean currency crisis: the role of a high frequency Korean won (KRW)–US dollar ($) exchange rate

Using a new type of 5 min high frequency dataset consisting of real time Korean won (KRW)–US dollar ($) exchange rates, this paper characterizes the volatility process of high frequency returns. The semi-parametric local Whittle estimation is applied to estimate the long memory dependency in the volatility process of the 5 min KRW–$ returns and the temporally aggregated returns data. The estimation results present that the underlying long memory dependency in the volatility process appears to be generally consistent across various temporally aggregated returns and that the exogenous shocks and the multiple breaks associated with the crisis in the market seem to induce greater long memory dependency during the crisis.     

Intraday effects of macroeconomic shocks on the US Dollar–Euro exchange rates

This paper characterizes the intriguing features of high frequency 15-min Dollar–Euro foreign exchange returns data. The FIGARCH model is found to be the preferred specification for the long memory volatility process in the high frequency returns. This paper then examines how macroeconomic shocks affect the high frequency Dollar–Euro returns on an intraday basis. Quantifying the intraday effects of the shocks on the high frequency returns by using a linearly distributed lag dummy variable, this paper finds that the effects on the high frequency returns are generally statistically significant and that they appear to be asymmetric depending on the regions and the signs of the shocks and to be persistent for several lags even within a day. However, the macroeconomic shocks are found not to affect the long memory property in the high frequency returns implying that the linear dummy variable model may not be enough to explain the long memory property.     

Effects of Japanese macroeconomic statistic announcements on the dollar/yen exchange rate: High-resolution picture

Using high-frequency transaction data of the actual trading platform, we examine market impact of Japanese macroeconomic statistics news within minutes of their announcements on the dollar/yen exchange rate. Macroeconomic statistics surprises that consistently have significant effect on dollar/yen returns include Tankan (business condition survey conducted by Bank of Japan), GDP, industrial production, price indices and balance of payment. The announcement itself, in addition to the magnitude of the surprise, is found to increase the number of deals and price volatility immediately after the announcement. Most effects, when significant, take place within 30 min of statistics announcements.     

LONG MEMORY IN SOUTHERN AFRICAN STOCK MARKETS

The paper examines long memory in equity returns and volatility for stock markets in Botswana, South Africa and Zimbabwe using the ARFIMA‐FIGARCH model in order to assess the efficiency of these markets in processing information. The findings are diverse. Significant long memory is demonstrated in the equity returns of Botswana; while, in South Africa this result is not statistically different from zero. For Zimbabwe returns are characterised by an anti‐persistent process. Furthermore, all the markets investigated provide evidence of long memory in volatility with the exception of Botswana where there is no evidence of volatility persistence and hence the return from taking risk in this market cannot be predicted on the basis of previous values.     

Farm credit and credit demand elasticities in Shaanxi and Gansu

This paper empirically estimates individual household credit demand elasticities based on 897 farm households surveyed in Shaanxi and Gansu provinces in the People's Republic of China (PRC) in October 2009. We used survey-based experimental techniques to extract individual household credit demand functions from which we estimated point demand elasticities. From a theoretical point of view, we proposed that as interest rates fell the demand for credit increased in elasticity, and this appears to hold in our data. We find a range of elasticities with mean point estimates of about ? 0.6. We find that nearly 20% of farm households have nearly perfectly inelastic demands for credit but we also find that nearly 20% have elasticities above ? 0.75 including some 15% that have elasticities greater than ? 1.0. Previous studies that have argued against credit policies because of the low inelasticity of demand do not generally hold. There is much heterogeneity in credit demand and we would argue that a full spectrum of targeted credit policies can be used to address differences across farms.     

Sources of time-varying trade balance and real exchange rate dynamics in East Asia

A sticky-price model with minimal assumptions for identification is used to motivate a time-varying model that allows for state dependent innovations to explore the trade balance dynamics of a group of East Asian economies. This paper shows that the correlation between the trade balance and the real exchange has historically been highly conditional on the type of macroeconomic shock. Permanent (transitory) shocks have historically produced a positive (negative) correlation between the trade balance and real exchange rate over the last 20 years. Second, since the Asian financial crisis the real exchange rate dynamics of the East Asian countries have been dominated by persistent component(s), while the dynamics of the trade balance have been more influenced by transitory factors.     

On the divergence between fuel and service prices: The importance of technological change and diffusion in an American frontier economy

This paper assembles heating fuel prices for the U.S. state of Vermont, from the colonial era to the present, in order to test whether energy fuel prices and energy service prices have diverged over this time period. Prior authors have reported evidence of a significant difference between long run energy fuel prices and energy service prices. However, this is the first analysis to pose this question beginning in the context of colonial America. In accord with earlier work focused in the U.K. the paper reports a significant divergence in fuel and service prices. In this setting real heating fuel prices increased over the 220 year time period by a factor of between 15 and 20. In contrast, heating service prices increased by a factor of two. Expressed in labor units, heating service prices have fallen in Vermont by 25%, while fuel prices were essentially flat. Finally, over this two century time period in Vermont and the U.K., the rate of change in service prices expressed in labor units is remarkably similar: − 1.1% and − 0.9%, per annum, respectively.     

Supply chain trade and technological transfer in the ASEAN + 3 region

This paper analyses how economic integration and the international division of labour have evolved among the ASEAN + 3 countries in the last 20 years. The paper proposes an indicator of the level of technological sophistication based on revealed comparative advantages and uses it to investigate the relation between technological advance, factor endowments and supply chain trade. It is shown that supply chain-trade does not facilitate technological transfer. On the contrary: FDI appears to have significant and negative spill-over effects on technological change. Positive spill-overs from FDI materialize only when host countries have sufficiently high levels of education.     

Fiscal limits and sovereign default risk in Japan

It is widely known that Japan has the highest debt-to-GDP ratio among OECD countries. If Japan’s national debt continues to balloon, fiscal crisis may occur in the future. This paper develops a closed economy model with defaultable government debt and conducts a simulation to investigate future sovereign debt risk.First, we estimate the fiscal limit which is defined as the sum of the discounted maximum fiscal surplus in all future periods. It is assumed that a partial default occurs when the amount of government debt exceeds the fiscal limit. We calculate the revenue-maximizing tax rate at the peak of the Laffer curve to derive the fiscal limit. As a result, the estimated average fiscal limit in Japan is much higher than that in Greece. In the Japanese economy, households are more patient and desire greater savings from greater discount factor derived from a lower real interest rate. Household saving habits support government bonds. This is the main reason why the Japanese government could have had a massive debt in addition to some room to raise the tax rate. Second, we simulate the model, using the estimated fiscal limit and non-linear computational methods. If the government debt-to-GDP ratio continues to increase for the next 20 years, the default probability will be over 10% and the sovereign risk premium will be approximately 2%. Furthermore, the default probability will reach approximately 80% and the sovereign risk premium will be 10% 30 years later.     

Retail power market competition with endogenous entry decision—An auction data analysis

Deregulation in the electric power industry has been aimed at promoting competition and thereby enhancing the industry’s efficiency. We use the auction data of public power procurements to study the impact of the reform on the retail power market in Japan. We quantify this impact by measuring a decline in power charges, controlling for the endogeneity bias caused by the entrants’ bid-submission decisions. Our results suggest that power charges would decline by about 0.48 yen/kW h on average when two or more providers bid at an auction.     

Is the price elasticity of demand for coal in China increasing?

China's dependence on coal is a major contributor to local and global environmental problems. In this paper we estimate the price elasticity of demand for coal in China using a panel of province-level data for 1998–2012. We find that provincial coal demand has become increasingly price elastic. As of 2012 we estimate that this elasticity was in the range − 0.3 to − 0.7 in point estimate terms when responses over two years are considered. The results imply that China's coal market is becoming more suited to price-based approaches to reducing emissions. The elimination of coal consumption subsidies could reduce national coal use and related emissions by around 2%.     

Housing and marital matching: A signaling perspective

This paper studies signaling behaviors in marital matching. As some of males' essential traits for marriage are hardly observable, a high-quality male is motivated to signal. This paper applies a modified Spence signaling model to the marriage market and tests the theoretical implications with survey data from rural China. We find that houses are primary signals in marriage markets in China, which explains both the high homeownership and the large housing sizes. We find 1) marriageable males are twice as much likely to build a house five years before marriage than five years after, while females do not behave the same way, 2) housing size is reflective of males' unobservable characteristics, especially in villages with high interest rates. Males with more social connections, higher income rank and greater wealth build larger houses. And 3) a ten-square-meter larger house reduces a male's probability of singlehood by 0.8% at the age of 30, and enables him to marry a wife 0.1 cm taller.     

The Enigmas of TFP in China: A meta-analysis

This paper presents a meta-analysis of 5308 observations of total factor productivity growth (TFPG) in China from 150 primary studies to provide some insightful explanations to the controversies about productivity growth in China in the current literature. The main findings include that (1) the mean TFPG of the aggregate economy at the national level in the current literature is only about 2% after 1978, which barely contributes to 20% economic growth; (2) there are three cycles for TFPG after 1978 and each circle lasts about 10 years; (3) sector-specific TFPGs are generally larger than aggregate economic TFPGs; (4) regional disparities of TFPG are significant and specifically the TFPG in East China is higher than that in Central and West China; (5) TFPG after 1978 is in general greater than that before 1978; and (6) peer-review process and paper languages are significantly correlated with TFPG results.     

中国股市收益分形分布的实证研究

近年来，分形分布在金融市场中的研究和应用逐渐引起研究者的浓厚兴趣。本文借助分形分布理论对中国股票市场的收益分布特性进行了实证研究，估计出了分形分布的参数，绘制了分形分布的密度曲线，并对其进行了拟合检验。实证结果表明，分形分布能较好地拟合中国股票市场的收益序列。     

Reducing China's regional disparities: Is there a growth cost?

While China's growth has been spectacular over the past 30 years, it has masked growing underlying disparities in the regional distribution of income with coastal provinces growing at a much faster rate than the rest of the country, exacerbating already marked differences in per capita income. Policy focused on addressing these growing disparities has had to face the possibility that spreading growth more evenly around the country will require a sacrifice of the national growth rate. Yet there is almost no empirical evidence that this is so and, if it is, how big the required sacrifice is. This paper contributes to filling this gap by analyzing the relationship between aggregate growth and the inequality of regional output distribution. We use a VAR model to simulate the effects over time on growth of a reduction in inequality and also the effects on inequality of an increase in growth. We find, first, that in the long run a more equal distribution can be obtained without a growth sacrifice. Second, in the short run a reduction in inequality reduces growth. Third, in the short and long runs an increase in growth actually reduces inequality.     

Special Quotes Invoke Autocorrelation in Japanese Stock Prices*

It is reported in the present paper that 1‐min returns on TOPIX have exhibited significant autocorrelation at 5‐min intervals since 1997/1998. Special quotes that are issued whenever there is a price jump in excess of a predetermined band seem to be the source of this autocorrelation, because these have been automatically updated at 5‐min intervals since August 1998 and have appeared during the first 30 min from opening. Individual stock returns also exhibit fifth‐order autocorrelation, but this disappears when the data with special quotes are excluded from the sample. Therefore, the autocorrelation is caused by the special quotes: a type of market microstructure noise.     

Further Long Memory Properties of Inflationary Shocks

Several previous studies have found fractionally integrated, or long memory behavior, in the conditional mean of inflation. This paper notes that extremely similar phenomena are also apparent in the squared and absolute values of residuals from fractionally filtered inflation series. Hence, the inflation process appears to have a dual long memory feature in both its first and its second conditional moments. We suggest a parametric model of long memory in both the conditional mean and the conditional variance. Some Monte Carlo evidence is presented that supports estimation of the model by approximate maximum likelihood methods. We then report estimated models for the inflation series for several different industrialized countries, including the United States. For nearly all of the countries in our study, there is strong evidence of statistically significant long memory parameters in both the conditional mean and the variance. We note some of the implications for modeling inflation.     

中国股市收益率与波动率跳跃性特征的实证分析

股票市场收益率通常小幅波动，但是当市场出现重大或者异常信息时，收益率会在短时间内发生大规模的运动．产生跳跃性变化，市场波动率也明显加剧。本文采用Jump—GARCH对沪深两市A股B股的这类跳跃性特征进行实证分析。根据该模型：当收益率小规模变化时，波动率由GARCH（1，1）平稳随机过程产生，但是当收益率发生跳跃性变化，波动率将背离GARCH（1，1）过程．调整到一个较高的水平。实证结果表明，该模型能够有效地估计出沪深两市收益率和波动率的跳跃性变化．比正态分布的GARCH模型更合理地反应了市场收益率和波动率过程。本文同时讨论了A股B股的跳跃性特征。     

The association of life satisfaction and self-rated health with income dynamics among male employees in Japan

In this study, we analyze how life satisfaction and self-rated health are associated with income dynamics. We used data from male employees in Japan (N = 1004) drawn from a panel dataset of career wage records spanning a period of over 30 years. The income history used in this study was based on administrative records; thus, the data were almost free of recall error. Our results show that life satisfaction was more closely associated with a change in lifetime average income or maximum income than with a change in income compared to the previous year, whereas the opposite was true for self-rated health. In addition, life satisfaction tended to resist a decline in response to a fall in income from its average or maximum level, but this was not the case for self-rated health. Furthermore, an income peak experienced in the past made both life satisfaction and self-rated health more sensitive to changes in income, whereas a trough experienced in the past made them less sensitive. These findings suggest that the association of income between subjective well-being and health should be studied further, within a dynamic framework.     

Central bank intervention and exchange rate volatility: Evidence from Japan using realized volatility

This paper presents new empirical evidence on the effectiveness of Bank of Japan's foreign exchange interventions on the daily realized volatility of USD/JPY exchange rates using high frequency data. Following Huang and Tauchen (2005) and Barndorff-Nielsen and Shephard, 2004, Barndorff-Nielsen and Shephard, 2006, we use bi-power variation to decompose daily realized volatility into two components: the smooth persistent and the discontinuous jump components. We model exchange rate returns, the different components of realized volatility and the central bank intervention using a system of simultaneous equations. We find strong support that interventions by Bank of Japan had increased both the continuous and the jump components of daily realized volatility. This suggests that the interventions by Bank of Japan had increased market volatility which not only caused short-lived positive jumps, but were also persistent over time. We did not find any evidence that interventions were effective in influencing the exchange rate returns for the entire sample period.