The effects of SARS on the Hong Kong tourism industry: An empirical evaluation

The objective of this study is to assess the temporal impact of SARS on the tourists' arrival in Hong Kong. An econometric strategy was carefully selected to determine the existence of unit roots in data series containing the number of tourist arrivals from 36 source countries between 1978 and 2001. The existence of unit roots can detect the stationary properties of the series. The analysis finds that data series of 24 countries contain unit roots and hence any form of exogenous shocks, like the SARS epidemic, can have permanent impact on the number of tourist arrivals. Included in this category are Japan, Taiwan, the US and the UK, which are the main source of tourists for Hong Kong. The paper recommends that authorities take source-country-specific measures to manage the negative effect of SARS.     

The ASEAN Free Trade Area: Implications for Indonesia's Imports

The Singapore Declaration of 1992, announcing the establishment of an ASEAN Free Trade Area (AFTA), effectively brings down tariff levels on intra-ASEAN trade to 0–5% by the year 2008. This paper estimates the changes in Inonesia's imports that will result from trade creation generated by AFTA. Our results show that Indonesia's imports from other ASEAN partners will increase by 6%, based on 1990 figures. This is far greater than the estimated effects of the existing PTA scheme. However, these results are upper- bound estimates and include only static changes.     

Decentralized evolutionary mechanisms for intertemporal economies: A possibility result

We consider a stationary, infinite horizon aggregative model with one consumer and one producer living in each period. A decentralized intertemporal mechanism, satisfying the following evolutionary property, is constructed: if the current period's producer and consumer verify their equilibrium conditions, then the allocation is actually executed, without further verification by future agents. The mechanism is based on the idea of continual planning revision. It is shown that the outcome is an intertemporally efficient allocation which maximizes the long run average of one period utilities from consumption.We would like to thank L. Hurwicz, E. Malinvaud, and R. Radner for valuable discussions, and two referees for helpful comments. Research on this project was partially supported by a National Science Foundation Grant.     

Reconstructing dynamics from intertemporal economic data

Summary This paper is concerned with the relationship between a continuous dynamical system and the trajectory generated by such a system. The main result provides necessary and sufficient conditions for an infinite data stream to be rationalized as the output of a continuous law of motion. The paper develops concepts of informativeness of a given set of intertemporal data and shows that informativeness is maximal when the data is chaotic. It also demonstrates that with probability one the sample paths from a non-trivial independent and identically distributed stochastic process cannot be rationalized as the output of a continuous deterministic system. Two impossibility results are discussed which show that even with an infinite amount of data the hypothesis that the data has been generated by a non-monotonic function cannot be ruled out. An application concerning the recovery of the excess demand function from a sequence of price observations from the tatonnement process is also given.I would like to thank Professors Bent Christensen and Mukul Majumdar for valuable discussions and an anonymous referee for helpful comments. Financial support from SSHRC and Quebec's Fonds FCAR is gratefully acknowledged.     

Chaotic tatonnement

Summary Debreu's theorem on excess demand functions is used to demonstrate the possibilities of ergodic and topological chaos in a discrete-time tatonnement process with only two goods. The result is in sharp contrast with the well-known result of Arrow and Hurwicz on system stability in a continuous time model of price adjustment with two commodities.We would like to thank Professors Jess Benhabib, Richard Day, John Guckenheimer, Philip Holmes, Nicholas Kiefer and Tapan Mitra.     

The intertemporal volatility structure of Euro CD rates

In this paper we examine the intertemporal volatility structure of Eurocurrency rates of five different maturities ranging from seven days to twelve months for six Euro CD currency denominations spanning the 1986–1992 period. the analysis used the common ARCH-feature testing methodology recently developed by Engle and Kozicki (1993). First, the results indicate presence of ARCH effects in the Eurocurrency rate series. This result suggests that modelling of Eurocurrency rates requires the inclusion of time-varying risk premia. Second, our evidence reveals that short- and long-term Eurocurrency rate series have the same volatility process. the results point out that a common time-varying volatility process characterises most Eurocurrency rate series across maturities and currency denominations. Hence, the common ARCH results imply that a common time-varying variance model would be the appropriate specification of the conditional heterscedasticity for most Eurocurrency rates.     

A pitchfork bifurcation in the tatonnement process★

Summary . This note extends the example of Gale (1963) by considering the continuous time tatonnement process for a class of two agent, two commodity exchange economies, parametrized by a number μ∈(0,1). We demonstrate that as the parameter passes a threshold value μ^* the unique, globally stable competitive equilibrium loses local stability while two new locally stable equilibria appear. Intuitively, as μ increases the income effect become increasingly more important relative to substitution effect, and eventually overwhelms the latter. As the parameter μ approaches 1, the economy tends to the example considered by Gale, as does the limiting behavior of the tatonnement. Received: February 28, 1996; revised version August 5, 1996     

EXPLAINING PREMIUMS AND DISCOUNTS ON CLOSED-END EQUALITY COUNTRY FUNDS

Over the past decade or so, the surge of interest among U.S. investors in international investing has led to the creation of numerous foreign equity country funds. Like U.S. closed-end mutual funds, the prices of such closed-end country funds fluctuate widely in relation to their underlying net asset values (NAVs).
In this paper, the authors summarize the major findings of their recent study of the performance of 28 country funds relative to their NAVs over the period 1978–1995. While 20 of the 28 funds traded at average discounts to their net asset values, the discounts for the country funds were smaller than those of the average U.S. fund, and over a quarter of the funds sold at premiums.
In an attempt to explain such premiums or discounts, the authors examined primarily three factors: (1) the sensitivity of country-fund returns (relative to that of local market indices) to U.S. returns; (2) the possible effects of local government investment restrictions; and (3) the impact of exchange rate changes. Although most of the eight funds that traded at average premiums represented countries with significant restrictions on capital flows and foreign ownership, there were also a number of funds with similar restrictions trading at significant discounts. In exploring the reasons for such discounts, the authors noted that the returns to the country funds were "surprisingly sensitive" to U.S. market conditions, thus reducing the extent of their diversification benefits for U.S. investors. The article also raises the possibility that if such country funds are not "priced at the margin" by globally diversified investors, U.S investors' "country-risk sentiments" could cause such funds to trade at discounts.