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Full-Text Articles in Economics

The Evolution Of The ‘Trade And …’ ‘Debate’: A View From Asean, Locknie Hsu Mar 2023

The Evolution Of The ‘Trade And …’ ‘Debate’: A View From Asean, Locknie Hsu

Research Collection Yong Pung How School Of Law

This article explores the ‘Trade and …’ ‘Debate’ in the context of trade and environment issues. It provides an explanation of the evolution of discussions of such issues in a non-dispute settlement context, using developments in the Association of Southeast Asian Nations’ integration efforts as illustrations. It also highlights a number of opportunities for trade and environment collaboration in negotiations for free trade agreement and Digital Economy Partnership Agreements.

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Cities In A Pandemic: Evidence From China, Badi H. Baltagi, Ying Deng, Li Jing, Zhenlin Yang Mar 2023

Cities In A Pandemic: Evidence From China, Badi H. Baltagi, Ying Deng, Li Jing, Zhenlin Yang

Research Collection School Of Economics

This paper studies the impact of urban density, city government efficiency, and medical resources on COVID-19 infection and death outcomes in China. We adopt a simultaneous spatial dynamic panel data model to account for (i) the simultaneity of infection and death outcomes, (ii) the spatial pattern of the transmission, (iii) the intertemporal dynamics of the disease, and (iv) the unobserved city-specific and time-specific effects. We find that, while population density increases the level of infections, government efficiency significantly mitigates the negative impact of urban density. We also find that the availability of medical resources improves public health outcomes conditional on …

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Hypothesis Testing Via Posterior-Test-Based Bayes Factors, Yong Li, Nianling Wang, Jun Yu, Yonghui Zhang Mar 2023

Hypothesis Testing Via Posterior-Test-Based Bayes Factors, Yong Li, Nianling Wang, Jun Yu, Yonghui Zhang

Research Collection School Of Economics

Hypothesis testing via p-value has been criticized in recent years. Bayes factors (BFs) have been tipped as a possible replacement of p-value for hypothesis testing. However, the standard BFs suffer from some theoretical and practical difficulties. For example, they are not well defined under improper priors and are subject to Jeffreys-Lindley-Bartlett’s paradox under vague priors. Moreover, they are difficult to compute for many models. In this paper, we propose to compare sampling distributions of the posterior-test-based statistics for hypothesis testing. Two posterior-test-based BFs are constructed from the posterior version of the likelihood ratio test and the Wald test, respectively. Under …

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Asymptotic Theory For Explosive Fractional Ornstein–Uhlenbeck Processes, Hui Jiang, Yajuan Pan, Weilin Liao, Qingshan Yang, Jun Yu Mar 2023

Asymptotic Theory For Explosive Fractional Ornstein–Uhlenbeck Processes, Hui Jiang, Yajuan Pan, Weilin Liao, Qingshan Yang, Jun Yu

Research Collection School Of Economics

This paper proposes estimators for the parameters of an explosive fractional Ornstein-Uhlenbeck process. The asymptotic properties for the diffusion estimators are developed under the in-fill asymptotic scheme, while the asymptotic properties for the drift estimators are developed under the double asymptotic scheme for the full range of the Hurst parameter. Simulation results demonstrate the effectiveness of the proposed estimators, and the asymptotic distributions provide a good approximation in finite samples. Empirical applications are presented to demonstrate the model’s usefulness and the practical value of the asymptotic theory.

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High-Dimensional Vars With Common Factors, Ke Miao, Peter C. B. Phillips, Liangjun Su Mar 2023

High-Dimensional Vars With Common Factors, Ke Miao, Peter C. B. Phillips, Liangjun Su

Research Collection School Of Economics

This paper studies high-dimensional vector autoregressions (VARs) augmented with common factors that allow for strong cross-sectional dependence. Models of this type provide a convenient mechanism for accommodating the interconnectedness and temporal co-variability that are often present in large dimensional systems. We propose an ℓ1-nuclear-norm regularized estimator and derive the non-asymptotic upper bounds for the estimation errors as well as large sample asymptotics for the estimates. A singular value thresholding procedure is used to determine the correct number of factors with probability approaching one. Both the LASSO estimator and the conservative LASSO estimator are employed to improve estimation precision. The conservative …

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On The Welfare Role Of Redundant Assets With Heterogenous Forecasts, Shurojit Chatterji, Atsushi Kajii Mar 2023

On The Welfare Role Of Redundant Assets With Heterogenous Forecasts, Shurojit Chatterji, Atsushi Kajii

Research Collection School Of Economics

We study a multiperiod model with a nominal bond that matures in one period and identify the set of e¢ cient allocations that can be sustained as Walrasian equilibria with heterogeneous forecasts. We next add a long maturity bond, which under perfect foresight would be a redundant asset, and show that it fundamentally expands the set of e¢ cient allocations that can be sustained as Walrasian equilibria. Indeed all wealth transfers compatible with e¢ ciency can arise endogenously. The key feature driving this conclusion are forecasting errors, which lead to ex post arbitrage opportunities that induce these income transfers.

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Are Markets Interested In Adapting To Climate? Insights From Singapore, Stella Whittaker, Tran Bao Phuong Nguyen Feb 2023

Are Markets Interested In Adapting To Climate? Insights From Singapore, Stella Whittaker, Tran Bao Phuong Nguyen

Sim Kee Boon Institute for Financial Economics

We have collected the views of leading practitioners and academics in Singapore involved in funding and financing urban climate change adaptation1 (thereon referred to as urban adaptation). Throughout this paper we discuss several vital perspectives on adaptation financing, namely responsibility for adaptation investment, the extent of government adaptation investment, private sector adaptation investment appetite and prospects for experimentation in adaptation financing. We also attempt to shed light on the existence or not of an adaptation financing gap2 in Singapore.

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Assessing The Odds Of A Us Recession, Thomas Lam, David Fernandez Feb 2023

Assessing The Odds Of A Us Recession, Thomas Lam, David Fernandez

Sim Kee Boon Institute for Financial Economics

In this commentary, SMU Sim Kee Boon Institute for Financial Economics (SKBI) Principal Researcher Thomas Lam and SKBI Director SMU Professor of Finance (Practice) Dave Fernandez offer their perspectives on the current multifaceted and highly charged US recession debate. While America is currently not in a downturn, the near-term odds of one have edged up, according to models based on key monthly and weekly indicators.

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Getting Dynamic Implementation To Work, Yi-Chun Chen, Richard Holden, Takashi Kunimoto, Yifei Sun, Tom Wilkening Feb 2023

Getting Dynamic Implementation To Work, Yi-Chun Chen, Richard Holden, Takashi Kunimoto, Yifei Sun, Tom Wilkening

Research Collection School Of Economics

We develop a new class of two-stage mechanisms, which fully implement any social choice function under initial rationalizability in complete information environments. We show theoretically that our Simultaneous Report (SR) mechanisms are robust to small amounts of incomplete information about the state of nature. We also highlight the robustness of the mechanisms to a wide variety of reasoning processes and behavioral assumptions. We show experimentally that a SR mechanism performs well in inducing truth-telling in both complete and incomplete information environments and that it can induce efficient investment in a two-sided hold-up problem with ex-ante investment. The SR mechanism also …

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The Financialization Of Cryptocurrencies, Lei Huang, Tse-Chun Lin, Fangzhou Lu, Jian Sun Feb 2023

The Financialization Of Cryptocurrencies, Lei Huang, Tse-Chun Lin, Fangzhou Lu, Jian Sun

Research Collection Lee Kong Chian School Of Business

We show that change in Grayscale Bitcoin Trust premium is the single most significant predictor of Bitcoin daily return. This sentiment measure is similar to the closed-end fund discount measure as in Baker and Wurgler (2006), but more likely to reflect the excess demand from traditional investors than from blockchain specialists. Although there is a substantial variation in Bitcoin price quotes worldwide, this Grayscale premium and discount predict Bitcoin daily return for the most liquid Bitcoin exchanges. Using K-means clustering and LDA analysis, we find that this predictability is especially significant when there is a large variation in bullish and …

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Impact Of Geographical Diversification And Limited Attention On Private Equity Fund Returns, Victor Ong Feb 2023

Impact Of Geographical Diversification And Limited Attention On Private Equity Fund Returns, Victor Ong

Research Collection Lee Kong Chian School Of Business

This article analyzes the effect of geographical diversification on global private equity (PE) fund returns. We find that there is a negative correlation between geographical diversification and PE fund returns. To establish the causality between geographical diversification and PE fund returns, we employ an instrumental variable analysis where the instrument used is the stock market capitalization of the host country where the PE fund is based. Our results apply to Net IRR, TVPI and DPI as dependent variables used to proxy for PE fund returns in the main regression model. A one standard deviation increase in geographical diversification results in …

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When Bias Contributes To Variance: True Limit Theory In Functional Coefficient Cointegrating Regression, Peter C. B. Phillips, Ying Wang Feb 2023

When Bias Contributes To Variance: True Limit Theory In Functional Coefficient Cointegrating Regression, Peter C. B. Phillips, Ying Wang

Research Collection School Of Economics

Limit distribution theory in the econometric literature for functional coefficient cointegrating regression is incorrect in important ways, influencing rates of convergence, distributional properties, and practical work. The correct limit theory reveals that components from both bias and variance terms contribute to variability in the asymptotics. The errors in the literature arise because random variability in the bias term has been neglected in earlier research. In stationary regression this random variability is of smaller order and can be ignored in asymptotic analysis but not without consequences for finite sample performance. Implications of the findings for rate efficient estimation are discussed. Simulations …

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Diagnosing Housing Fever With An Econometric Thermometer, Shuping Shi, Peter C. B. Phillips Feb 2023

Diagnosing Housing Fever With An Econometric Thermometer, Shuping Shi, Peter C. B. Phillips

Research Collection School Of Economics

Housing fever is a popular term to describe an overheated housing market or housing price bubble. Like other financial asset bubbles, housing fever can inflict harm on the real economy, as indeed the U.S. housing bubble did in the period following 2006 leading up to the general financial crisis and great recession. One contribution that econometricians can make to minimize the harm created by a housing bubble is to provide a quantitative “thermometer” for diagnosing ongoing housing fever. Early diagnosis can enable prompt and effective policy action that reduces long-term damage to the real economy. This paper provides a selective …

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Covariate Adjustment In Experiments With Matched Pairs, Yuehao Bai, Liang Jiang, Joseph P. Romano, Azeem M. Shaikh, Yichong Zhang Feb 2023

Covariate Adjustment In Experiments With Matched Pairs, Yuehao Bai, Liang Jiang, Joseph P. Romano, Azeem M. Shaikh, Yichong Zhang

Research Collection School Of Economics

This paper studies inference on the average treatment effect in experiments in which treatment status is determined according to “matched pairs” and it is additionally desired to adjust for observed, baseline covariates to gain further precision. By a “matched pairs” design, we mean that units are sampled i.i.d. from the population of interest, paired according to observed, baseline covariates and finally, within each pair, one unit is selected at random for treatment. Importantly, we presume that not all observed, baseline covariates are used in determining treatment assignment. We study a broad class of estimators based on a “doubly robust” moment …

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Fully Modified Least Squares Cointegrating Parameter Estimation In Multicointegrated Systems, Igor L. Kheifets, Peter C. B. Phillips Feb 2023

Fully Modified Least Squares Cointegrating Parameter Estimation In Multicointegrated Systems, Igor L. Kheifets, Peter C. B. Phillips

Research Collection School Of Economics

Multicointegration is traditionally defined as a particular long run relationship among variables in a parametric vector autoregressive model that introduces additional cointegrating links between these variables and partial sums of the equilibrium errors. This paper departs from the parametric model, using a semiparametric formulation that reveals the explicit role that singularity of the long run conditional covariance matrix plays in determining multicointegration. The semiparametric framework has the advantage that short run dynamics do not need to be modeled and estimation by standard techniques such as fully modified least squares (FM-OLS) on the original system is straightforward. The paper derives FM-OLS …

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Modeling And Forecasting Realized Volatility With The Fractional Ornstein-Uhlenbeck Process, Xiaohu Wang, Weilin Xiao, Jun Yu Feb 2023

Modeling And Forecasting Realized Volatility With The Fractional Ornstein-Uhlenbeck Process, Xiaohu Wang, Weilin Xiao, Jun Yu

Research Collection School Of Economics

This paper proposes to model and forecast realized volatility (RV) using the fractional Ornstein-Uhlenbeck (fO-U) process with a general Hurst parameter, H. A two-stage method is introduced for estimating parameters in the fO-U process based on discrete-sampled observations. In the first stage, H is estimated based on the ratio of two second-order differences of observations from different frequencies. In the second stage, with the estimated , the other parameters of the model are estimated by the method of moments. All estimators have closed-form expressions and are easy to implement. A large sample theory of the proposed estimators is derived. Extensive …

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A Taxonomy Of Non-Dictatorial Unidimensional Domains, Shurojit Chatterji, Huaxia Zeng Jan 2023

A Taxonomy Of Non-Dictatorial Unidimensional Domains, Shurojit Chatterji, Huaxia Zeng

Research Collection School Of Economics

Non-dictatorial preference domains allow the design of unanimous social choice functions (henceforth, rules) that are non-dictatorial and strategy-proof. On a class of preference domains called unidimensional domains, we show that the unique seconds property characterizes all non-dictatorial domains. Subsequently, we provide an exhaustive classification of all non-dictatorial, unidimensional domains, based on a simple property of two-voter rules called invariance. The domains constituting the classification are semi-single-peaked domains and semi-hybrid domains (introduced here) which are two appropriate weakenings of single-peaked domains and shown to allow strategy-proof rules to depend on non-peak information of voters' preferences; the canonical strategy-proof rules for these …

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Volatility Puzzle: Long Memory Or Antipersistency, Shuping Shi, Jun Yu Jan 2023

Volatility Puzzle: Long Memory Or Antipersistency, Shuping Shi, Jun Yu

Research Collection School Of Economics

The log realized volatility (RV) is often modeled as an autoregressive fractionally integrated moving average model ARFIMA(1, d, 0). Two conflicting empirical results have been found in the literature. One stream shows that log RV has a long memory (i.e., the fractional parameter d > 0). The other stream suggests that the autoregressive coefficient α is near unity with antipersistent errors (i.e., d

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Decentralizability Of Efficient Allocations With Heterogenous Forecasts, Shurojit Chatterji, Atsushi Kajii Jan 2023

Decentralizability Of Efficient Allocations With Heterogenous Forecasts, Shurojit Chatterji, Atsushi Kajii

Research Collection School Of Economics

Do price forecasts of rational economic agents need to coincide in perfectly competitive complete markets? To address this question, we define an efficient temporary equilibrium (ETE) within the framework of a two period economy. Although an ETE allocation is intertemporally efficient and is obtained by perfect competition, it can arise without the agents forecasts being completely coordinated on a perfect foresight price. Nevertheless, it entails price forecasts delicately related with each other: we show that regardless of the number of agents, there is a one dimensional set of such Pareto efficient allocations for generic endowments.

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Is Democracy Good For Growth? Development At Political Transition Time Matters, Di Sima, Fali Huang Jan 2023

Is Democracy Good For Growth? Development At Political Transition Time Matters, Di Sima, Fali Huang

Research Collection School Of Economics

Is democracy a better political regime for economic prosperity than autocracy? This paper shows that the answer depends on the initial economic development level during the democratic transition when the foundation of institutions was laid. Democracy facilitates growth only in countries that already have adequate development at transition time. These countries are more likely to create and sustain growth-enhancing institutions than others. Without appropriate development, democracy does not improve growth; this applies to about 40% of the third-wave democratized countries. These results are based on a sample of 153 countries in 1960–2010 and robust to various specifications and endogeneity issues.

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Can Digital Finance Promote Low-Carbon Transition? Evidence From China, Xing Ge, Tomoki Fujii Jan 2023

Can Digital Finance Promote Low-Carbon Transition? Evidence From China, Xing Ge, Tomoki Fujii

Research Collection School Of Economics

Using panel data of Chinese cities from 2011 to 2019, this paper analyzes the impact of digital finance on low-carbon transition derived from a super-efficiency slacks-based measure data envelopment analysis. We find that digital finance promotes low-carbon transition, and this finding is robust with respect to the choice of sample, potential presence of measurement issue, choice of study period, presence of other policies, and potential endogeneity, among others. This impact is at least in part goes through increased green innovations. We also find evidence for impact heterogeneity across locations and by the level of low-carbon transition.

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School Attendance Information Or Conditional Cash Transfer? Evidence From A Randomized Field Experiment In Rural Bangladesh, Tomoki Fujii, Christine Ho, Rohan Ray, Abu S. Shonchoy Jan 2023

School Attendance Information Or Conditional Cash Transfer? Evidence From A Randomized Field Experiment In Rural Bangladesh, Tomoki Fujii, Christine Ho, Rohan Ray, Abu S. Shonchoy

Research Collection School Of Economics

Low school attendance remains an important challenge in resource-poor settings with cash and information constraints. We compare conditional cash transfer (CCT) treatments with framing variations (gain and loss) against attendance information treatment as interventions to address these constraints in a unified framework. Our randomized evaluation shows CCT treatments increase attendance by 11 percentage points, about half of which is attributable to attendance information. These treatments improve girls’ academic aspirations and reduce early marriage. Daily CCT set at a quarter of local child wage maximizes attendance impact. We highlight the importance of low-cost information technology to boost attendance sustainably and cost-effectively.

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Growth And Risk: A View From International Trade, Pravin Krishna, Andrei A. Levcheko, Lin Ma, William F. Maloney Jan 2023

Growth And Risk: A View From International Trade, Pravin Krishna, Andrei A. Levcheko, Lin Ma, William F. Maloney

Research Collection School Of Economics

This paper studies the cross-country patterns of risky innovation and growth through the lens of international trade. We use a simple theoretical framework of risky quality upgrading by firms under varying levels of financial development to derive two predictions. First, the mean rate of quality growth and the corresponding cross-sectional variance of quality growth in a country are positively correlated. Second, both the mean and variance of quality changes are positively correlated with the country’s level of financial development. We then test these two hypotheses using data on disaggregated (HS10) bilateral exports to the United States. The patterns in the …

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Retail Pharmacies And Drug Diversion During The Opioid Epidemic, Aljoscha Janssen, Xuan Zhang Jan 2023

Retail Pharmacies And Drug Diversion During The Opioid Epidemic, Aljoscha Janssen, Xuan Zhang

Research Collection School Of Economics

This study investigates the role of retail pharmacy ownership in the opioid epidemic. Using data of prescription opioid orders, we show that compared with chain pharmacies, independent pharmacies dispense 39.1% more opioids and 60.5% more OxyContin. After an independent pharmacy becomes a chain pharmacy, opioid dispensing decreases. Using the OxyContin reformulation, which reduced non-medical demand but not the legitimate medical demand, we show that at least a third of the difference in the amount of OxyContin dispensed can be attributed to non-medical demand. We show that differences in competitive pressure and whether pharmacists own the pharmacy drive our estimates.

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Predictive Taxonomy Analytics (Lasso): Predicting Outcome Types Of Cyber Breach, Jing Rong Goh, Shaun S. Wang, Yaniv Harel, Gabriel Toh Jan 2023

Predictive Taxonomy Analytics (Lasso): Predicting Outcome Types Of Cyber Breach, Jing Rong Goh, Shaun S. Wang, Yaniv Harel, Gabriel Toh

Research Collection School Of Economics

Cyber breaches are costly for the global economy and extensive efforts have gone into improving the cybersecurity infrastructure. There are numerous types of cyber breaches that vary greatly in terms of cause and impact, resulting in an extensive literature for individual cyber breach type. Our paper seeks to provide a general framework that can be easily applied to analyze different types of cyber breaches. Our framework is inspired by the taxonomy approach in the cybersecurity literature, where it was proposed that an effective set of taxonomy can provide a direction on supporting improved decision-making in cyber risk management and selecting …

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Conditional Evaluation Of Predictive Models: The Cspa Command, Jia Li, Zhipeng Liao, Rogier Quaedvlieg, Wenyu Zhou Jan 2023

Conditional Evaluation Of Predictive Models: The Cspa Command, Jia Li, Zhipeng Liao, Rogier Quaedvlieg, Wenyu Zhou

Research Collection School Of Economics

In this article, we introduce a new command, cspa, that implements the conditional superior predictive ability test developed in Li, Liao, and Quaedvlieg (2022, Review of Economic Studies 89: 843–875). With the conditional performance of predictive methods measured nonparametrically by the conditional expectation functions of their predictive losses, we test the null hypothesis that a benchmark model weakly outperforms a collection of competitors uniformly across the conditioning space. The proposed command can implement this test for both independent cross-sectional data and serially dependent time-series data. Confidence sets for the most superior model can be obtained by inverting the test, for …

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Presidential Economic Approval Rating And The Cross-Section Of Stock Returns, Zilin Chen, Zhi Da, Dashan Huang, Liyao Wang Jan 2023

Presidential Economic Approval Rating And The Cross-Section Of Stock Returns, Zilin Chen, Zhi Da, Dashan Huang, Liyao Wang

Research Collection Lee Kong Chian School Of Business

We construct a monthly presidential economic approval rating (PEAR) index from 1981 to 2019, by averaging ratings on the president’s handling of the economy across various national polls. In the cross-section, stocks with high betas to changes in the PEAR index significantly under-perform those with low betas by 1.00% per month in the future, on a risk-adjusted basis. The low PEAR beta premium persists up to one year, and is present in various sub-samples and even in other G7 countries. PEAR beta dynamically reveals a firm’s perceived alignment to the incumbent president’s economic policies and investors seem to misprice such …

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A Mixture Autoregressive Model Based On Student’S T–Distribution, Mika Meitz, Daniel Preve, Pentti Saikkonen Jan 2023

A Mixture Autoregressive Model Based On Student’S T–Distribution, Mika Meitz, Daniel Preve, Pentti Saikkonen

Research Collection School Of Economics

A new mixture autoregressive model based on Student’s t–distribution is proposed. A key feature of our model is that the conditional t–distributions of the component models are based on autoregressions that have multivariate t–distributions as their (low-dimensional) stationary distributions. That autoregressions with such stationary distributions exist is not immediate. Our formulation implies that the conditional mean of each component model is a linear function of past observations and the conditional variance is also time-varying. Compared to previous mixture autoregressive models our model may therefore be useful in applications where the data exhibits rather strong conditional heteroskedasticity. Our formulation also has …

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R&D Subsidies In Permissive And Restrictive Environment: Evidence From Korea, Yumi Koh, Gea M. Lee Jan 2023

R&D Subsidies In Permissive And Restrictive Environment: Evidence From Korea, Yumi Koh, Gea M. Lee

Research Collection School Of Economics

This paper investigates the extent to which a regulatory environment for R&D subsidies shapes the magnitude and direction of R&D subsidies set by a government and consequent innovation paths. When the WTO adopted a permissive regulatory environment, we find that the Korean government increased R&D subsidies significantly (89.21%) and selectively so for firms and industries with higher returns. Recipient firms conducted less basic research and more development research. Improvements in innovations were mostly incremental and minor. However, such changes did not persist once the WTO switched to a restrictive regulatory environment. Our findings show that the regulatory environment imposed by …

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Bubble Testing Under Polynomial Trends, Xiaohu Wang, Jun Yu Jan 2023

Bubble Testing Under Polynomial Trends, Xiaohu Wang, Jun Yu

Research Collection School Of Economics

This paper develops the asymptotic theory of the least squares estimator of the autoregressive (AR) coefficient in an AR(1) regression with intercept when data is generated from a polynomial trend model in different forms. It is shown that the commonly used right-tailed unit root tests tend to favor the explosive alternative. A new procedure, which implements the right-tailed unit root tests in an AR(2) regression, is proposed. It is shown that when the data generating process has a polynomial trend, the test statistics based on the new procedure cannot find evidence of explosiveness. Whereas, when the data generating process is …

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