Social and Behavioral Sciences Commons^™

Domestic Liquidity Conditions And Monetary Policy In Singapore, Hwee Kwan Chow-Tan

Research Collection School Of Economics

Singapore has an unusual exchange rate-centered monetary policy framework that has served the economy well over the past decades. Monetary policy operations are carried out by the central bank through the management of the Singapore dollar against a currency basket. As is well recognized, such foreign exchange interventions do have an impact on domestic liquidity conditions. However, in the case of Singapore, this tends to be counteracted by the liquidity impact of public sector operations related to the fiscal position and the national pension scheme. The central bank takes into account the net liquidity impact these and other autonomous money …

Adaptive Estimation Of Continuous-Time Regression Models Using High-Frequency Data, Jia Li, Viktor Todorov, George Tauchen

Research Collection School Of Economics

We derive the asymptotic efficiency bound for regular estimates of the slope coefficient in a linear continuous-time regression model for the continuous martingale parts of two Itô semimartingales observed on a fixed time interval with asymptotically shrinking mesh of the observation grid. We further construct an estimator from high-frequency data that achieves this efficiency bound and, indeed, is adaptive to the presence of infinite-dimensional nuisance components. The estimator is formed by taking optimal weighted average of local nonparametric volatility estimates that are constructed over blocks of high-frequency observations. The asymptotic efficiency bound is derived under a Markov assumption for the …

Non-Separable Models With High-Dimensional Data, Liangjun Su, Takuya Ura, Yichong Zhang

Research Collection School Of Economics

This paper studies non-separable models with a continuous treatment when the dimension of the control variables is high and potentially larger than the effective sample size. We propose a three-step estimation procedure to estimate the average, quantile, and marginal treatment effects. In the first stage we estimate the conditional mean, distribution, and density objects by penalized local least squares, penalized local maximum likelihood estimation, and penalized conditional density estimation, respectively, where control variables are selected via a localized method of L1-penalization at each value of the continuous treatment. In the second stage we estimate the average and the marginal distribution …

Evaluating The Empirical Performance Of Dsge Models: What Is The Role Of Search And Matching Frictions In The Labor And Capital Markets?, Weng Sam Mok

Dissertations and Theses Collection

A major perspective in explaining involuntary unemployment is to recognize the existence of job market frictions, in particular, job market matching frictions. The workhorse model employed is the Diamond- Mortensen-Pissarides (DMP) model. Similar to the labor market, the market for physical capital markets exhibits the same characteristics with a pool of unsold inventory as well as used capital that is sold and reallocated to other terms. Nevertheless, past research has highlighted several issues of the DMP model in matching the characteristics of the labor market. In a model enriched with labor participation flows and job separation, I evaluate the model …

Sources Of Health Financing And Health Outcomes: A Panel Data Analysis, Tomoki Fujii

Research Collection School Of Economics

We study the differential impacts of public and private sources of health spending on health outcomes using a triple difference approach. We find that private health spending has on average a higher health-promoting effect than public health spending. This result is robust with respect to the choice of outcome measure and covariates in the regression and driven primarily by the countries with ineffective governments. Once we restrict our sample to countries with effective governments, private health spending is no better than public health spending for improving the health outcome.

Bubble Testing Under Deterministic Trends, Xiaohu Wang, Jun Yu

Research Collection School Of Economics

This paper develops the asymptotic theory of the ordinary least squares estimator of the autoregressive (AR) coefficient in various AR models, when data is generated from trend-stationary models in different forms. It is shown that, depending on how the autoregression is specified, the commonly used right-tailed unit root tests may tend to reject the null hypothesis of unit root in favor of the explosive alternative. A new procedure to implement the right-tailed unit root tests is proposed. It is shown that when the data generating process is trend-stationary, the test statistics based on the proposed procedure cannot find evidence of …

Fair Division With Uncertain Needs, Jingyi Xue

Research Collection School Of Economics

Imagine that agents have uncertain needs and a resource must be divided before uncertainty resolves. In this situation, waste typically occurs when the assignment to an agent turns out to exceed his realized need. How should the resource be divided in the face of possible waste? This is a question out of the scope of the existing rationing literature. Our main axiom to address the issue is no domination. It requires that no agent receive more of the resource than another while producing a larger expected waste, unless the other agent has been fully compensated. Together with conditional strict endowment …

Belt, Road, And The Xinjiang Issue, Singapore Management University

Perspectives@SMU

The Belt Road Initiative promises economic development for China’s westernmost province but reality on the ground is less promising

Cooperation Is Key To Building China’S Bay Area, Singapore Management University

Perspectives@SMU

Guangdong-Hong Kong-Macao Greater Bay Area is expected to surpass the Tokyo Bay Area or San Francisco Bay Area in ten years, if the cities in the region can leverage their strengths, streamline their coordination mechanism and speed up the economy integration,” said Dr. Tse Kwok-leung, who currently serves as head of Economics and Policy Research at the Bank of China (Hong Kong) Limited. Dr. Tse was speaking at a seminar themed “How to Build a World-class Guangdong-Hong Kong-Macao Greater Bay Area” organized by the Hong Kong General Chamber of Commerce in July 2017.

What If Bots Collide And Collude In Setting Prices?, Singapore Management University

Perspectives@SMU

Conduct driven by algorithms is a challenge for competition law

Favorite-Longshot Bias In Pari-Mutuel Betting: An Evolutionary Explanation, Atsushi Kajii, Takahiro Watanabe

Research Collection School Of Economics

Favorite-longshot bias (FLB) refers to an observed tendency whereby “longshots” are overvalued and favorites are undervalued. We offer an evolutionary explanation for FLB in pari-mutuel betting using a simple market model. A bettor is forced to quit with some probability if his total net gain in one day is negative. Because of a positive track take, the expected returns of any strategy are negative, and so every agent must eventually lose and disappear in the long run. Those who favor longshots have a better chance of getting ahead with rare but large gains, enabling them to survive for longer than …

On The Relationship Between Household Wealth And Entrepreneurship, Jungho Lee

Research Collection School Of Economics

Motivated by a substantial number of startup owners with negative household net worth, I present a model that incorporates credit borrowing into Evans and Jovanovic [1989]. The estimated model generates no relationship between household wealth and the propensity for business entry. Ignoring credit borrowing for potential business owners substantially overstates the efficiency loss from financial constraints in business entry. However, the efficiency loss in investments by the entrants is large even if credit borrowing is allowed. Individuals who start a business once credit borrowing is available are those whose business ideas are of a high-enough quality to compensate high financing …

Structural Inference From Reduced Forms With Many Instruments, Peter C. B. Phillips, Wayne Yuan Gao

Research Collection School Of Economics

This paper develops exact finite sample and asymptotic distributions for structural equation tests based on partially restricted reduced form estimates. Particular attention is given to models with large numbers of instruments, wherein the use of partially restricted reduced form estimates is shown to be especially advantageous in statistical testing even in cases of uniformly weak instruments. Comparisons are made with methods based on unrestricted reduced forms, and numerical computations showing finite sample performance of the tests are reported. Some new results are obtained on inequalities between noncentral chi-squared distributions with different degrees of freedom that assist in analytic power comparisons.

Essays On Transportation Cost, Social Security Retirement Income And Housing Market, Naqun Huang

Dissertations and Theses Collection

This dissertation comprises three papers that study how transportation cost affect price distribution across a city, how home equity affects the timing of pension withdrawal, and potential implications of macroprudential policies on the price informativeness. Specifically, the first paper examines how a change in the cost of car ownership affects housing price gradient with respect to distance from the central business district (CBD) in Singapore. The second paper investigates how household home equity affect the timing of claiming Social Security Retirement Income (SSRI) in the United States. The third paper explores how countercyclical policies in Singapore real estate market affect …

On Random Assignment Problems, Peng Liu

Dissertations and Theses Collection

This dissertation studies the standard random assignment problem (Bogomolnaia and Moulin (2001)) and investigates the scope of designing a desirable random assignment rule. Specifically, I ask the following two questions:

1. Is there a reasonably restricted domain of preferences on which there exists an strategy-sd-efficient proof, sd-efficient and sd-envy-free or equal-treatment-of-equals rule?

2. Moreover, if the answer is in the affirmative, what is that rule?

As a starting point, attention is restricted to the connected domains (Monjardet (2009)). It is shown that if a connected domain admits a desirable random assignment rule, it is structured in a specific way: a …

Twin Momentum: Fundamental Trends Matter, Dashan Huang, Huacheng Zhang, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

Using both the levels and the time-series trends of a collection of firms' major fundamentals, we find that fundamentals matter after all: they can also generate strong return momentum. A fundamental momentum strategy that goes long stocks with fundamental in the top quintile and short stocks with fundamental in the bottom quintile earns a monthly average return of 88 bps, and is comparable with the popular price momentum but has little correlation. Combining price momentum and fundamental momentum yields a twin momentum, which has an average return more than the sum of both price momentum and fundamental momentum. Twin momentum …

Every Random Choice Rule Is Backwards-Induction Rationalizable, Jiangtao Li, Rui Tang

Research Collection School Of Economics

Motivated by the literature on random choice and in particular the random utility models, we extend the analysis in Bossert and Sprumont (2013) to include the possibility that players exhibit stochastic preferences over alternatives. We prove that every random choice rule is backwards-induction rationalizable.

Forecasting Stock Returns In Good And Bad Times: The Role Of Market States, Dashan Huang, Fuwei Jiang, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

This paper proposes a two-state predictive regression model and shows that stock market 12-month return (TMR), the time-series momentum predictor of Moskowitz, Ooi, and Pedersen (2012), forecasts the aggregate stock market negatively in good times and positively in bad times. The out-of-sample R-squares are 0.96% and 1.72% in good and bad times, or 1.28% and 1.41% in NBER economic expansions and recessions, respectively. The TMR predictability pattern holds in the cross-section of U.S. stocks and the international markets. Our study shows that the absence of return predictability in good times, an important finding of recent studies, is largely driven by …

Growing Through The Merger And Acquisition, Jianhuan Xu

Research Collection School Of Economics

The paper studies with an endogenous growth model how the merger and acquisition (M&A) affects the aggregate growth rate. We model the M&A as a capital reallocation process, which can increase both productivity and growth rates of firms. The model is tractable and greatly consistent with patterns observed in the M&A at the micro level. Matching our model to the data, we find that prohibiting the M&A would lead to the reduction of the aggregate growth rate of US economy by 0.1% and the reduction of the aggregate TFP by 5%.

Hedging And Pricing Rent Risk With Search Frictions, Briana Chang, Hyunsoo Choi, Harrison Hong, Jeffrey Kubik

Research Collection Lee Kong Chian School Of Business

The desire of risk-averse households to hedge rent risk is thought to increase home ownership and prices. While evidence for the ownership implication is compelling, support for the price effect is mixed. We show that an important reason is search frictions. Rent risk reduces outside options, leading to less-picky buyers and worse home/buyer matches. This attenuates the rise in the price-to-rent ratio that would otherwise occur without frictions. Consistent with our model, a house remains on the market for fewer days when rent risk is higher. Accounting for frictions significantly increases the effect of rent risk on home prices.

Hedging And Pricing Rent Risk With Search Frictions, Briana Chang, Hyunsoo Choi, Harrison Hong, Jeffrey Kubik

Research Collection Lee Kong Chian School Of Business

The desire of risk-averse households to hedge rent risk is thought to increase home ownership and prices. While evidence for the ownership implication is compelling, support for the price effect is mixed. We show that an important reason is search frictions. Rent risk reduces outside options, leading to less-picky buyers and worse home/buyer matches. This attenuates the rise in the price-to-rent ratio that would otherwise occur without frictions. Consistent with our model, a house remains on the market for fewer days when rent risk is higher. Accounting for frictions significantly increases the effect of rent risk on home prices.

Fertility And Rural Electrification In Bangladesh, Tomoki Fujii, Abu S. Shonchoy

Research Collection School Of Economics

We use a household-level panel dataset from Bangladesh to examine the household-level relationship between fertility and the access to electricity. We find that the household's access to electricity reduces the change in the number of children by about 0.1 to 0.25 children in a period of five years in most estimates. This finding also applies to retrospective panel data and is robust to the choice of covariates and estimation methods. Our finding passes falsification test and corroborates with the predictions of our theoretical model on the households' time use and consumption pattern.

Analysis Of Spatial Data With A Nested Correlation Structure: An Estimating Equations Approach., Oyelola A. Adegboye, Denis H. Y. Leung, You-Gan Wang

Research Collection School Of Economics

Spatial statistical analyses are often used to study the link between environmental factors and the incidence of diseases. In modelling spatial data, the existence of spatial correlation between observations must be considered. However, in many situations, the exact form of the spatial correlation is unknown. This paper studies environmental factors that might influence the incidence of malaria in Afghanistan. We assume that spatial correlation may be induced by multiple latent sources. Our method is based on a generalized estimating equation of the marginal mean of disease incidence, as a function of the geographical factors and the spatial correlation. Instead of …

Growing Through The Merger And Acquisition, Jianhuan Xu

Research Collection School Of Economics

The paper studies with an endogenous growth model how the merger and acquisition (M&A) affects the aggregate growth rate. We model the M&A as a capital reallocation process, which can increase both productivity and growth rates of firms. The model is tractable and greatly consistent with patterns observed in the M&A at the micro level. Matching our model to the data, we find that prohibiting the M&A would lead to the reduction of the aggregate growth rate of US economy by 0.1% and the reduction of the aggregate TFP by 5%.

Asean In 2025, Singapore Management University

Perspectives@SMU

Will ASEAN ever progress beyond being a forum to discuss, and sometimes settle, differences?

China’S Pearl River Delta Development: A Game Changer For Hong Kong, Singapore Management University

Perspectives@SMU

“Hong Kong government has to think out of the box and take initiative to lead Hong Kong to break the bottle neck in economy development,” said Dr. Fang Zhou, Research Director of One Country Two Systems Research Institute (OCTSRI), a non-government public policy think tank in Hong Kong, at a seminar organized by Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong in November 2016.

Indirect Inference In Spatial Autoregression, Maria Kyriacou, Peter C. B. Phillips, Francesca Rossi

Research Collection School Of Economics

Ordinary least-squares (OLS) is well known to produce an inconsistent estimator of the spatial parameter in pure spatial autoregression (SAR). In this paper, we explore the potential of indirect inference to correct the inconsistency of OLS. Under broad conditions, it is shown that indirect inference (II) based on OLS produces consistent and asymptotically normal estimates in pure SAR regression. The II estimator used here is robust to departures from normal disturbances and is computationally straightforward compared with quasi-maximum likelihood (QML). Monte Carlo experiments based on various specifications of the weight matrix show that: (a) the II estimator displays little bias …

Industry Integration And Stock Price Synchronicity, Hao Cheng, Kian Guan Lim, Tien Foo Sing, Long Wang

Research Collection Lee Kong Chian School Of Business

This paper provides an alternative explanation of the negative relationship between price synchronicity and proprietary right protection that are uncorrelated to the information hypothesis. Using empirical data for 40 countries, we show that stock market volatility and firm size have significant impact on stock price synchronicity. We find significant correlations of international R2 disparity with industry structure integrations. The derived industry integration indices that capture industry correlations significantly explain cross-sectional and temporal variations in price synchronicity. The results imply that tighter industry integration leads to higher R2, and also explain away the property rights factor found in the information hypothesis.

Indirect Inference In Spatial Autoregression, Maria Kyriacou, Peter C. B. Phillips, Francesca Rossi

Research Collection School Of Economics

Ordinary least-squares (OLS) is well known to produce an inconsistent estimator of the spatial parameter in pure spatial autoregression (SAR). In this paper, we explore the potential of indirect inference to correct the inconsistency of OLS. Under broad conditions, it is shown that indirect inference (II) based on OLS produces consistent and asymptotically normal estimates in pure SAR regression. The II estimator used here is robust to departures from normal disturbances and is computationally straightforward compared with quasi-maximum likelihood (QML). Monte Carlo experiments based on various specifications of the weight matrix show that: (a) the II estimator displays little bias …

Trump And Asia, Singapore Management University

Perspectives@SMU

The American president is off to an uncertain start in his first 100 days in office but his administration could yet develop a coherent foreign policy