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Articles 121 - 150 of 221
Full-Text Articles in Finance
Quasi-Option Value Under Strategic Interactions, Tomoki Fujii, Ryuichiro Ishikawa
Quasi-Option Value Under Strategic Interactions, Tomoki Fujii, Ryuichiro Ishikawa
Research Collection School Of Economics
We consider a simple two-period model of irreversible investment under strategic interactions between two players. In this setup, we show that the quasi-option value may cause some conceptual difficulties. In case of asymmetric information, decentralized investment decisions fail to induce first-best allocations. Therefore a regulator may not be able to exercise the option to delay the decision to develop. We also show that information-induced inefficiency may arise in a game situation and that under certain assumptions inefficiency can be eliminated by sending asymmetric information to the players, even when the regulator faces informational constraints. Our model is potentially applicable to …
Impact Of Remittances On Schooling In The Philippines: Does The Relationship To The Household Head Matter?, Tomoki Fujii
Impact Of Remittances On Schooling In The Philippines: Does The Relationship To The Household Head Matter?, Tomoki Fujii
Research Collection School Of Economics
The remittance have emerged as one of the most important sources of international flows. In the Philippines, the amount of remittance receipts has more than doubled over a decade since early 1990s. As a result, the way remittances are used has become extremely important for economic development. Unlike the previous studies, we allow for the potential heterogeneity in the impact of remittances across various relationships to the head of household and take into account the potential negative effects of being guarded by someone other than the parents. We find that the impact of remittances on schooling is generally positive and …
Need Singapore Fear Floating? A Dsge-Var Approach, Hwee Kwan Chow, Paul D. Mcnelis
Need Singapore Fear Floating? A Dsge-Var Approach, Hwee Kwan Chow, Paul D. Mcnelis
Research Collection School Of Economics
This paper uses a DSGE-VAR model to examine the managed exchange-rate system at work in Singapore and asks if the country has any reason to fear floating the exchange rate with a Taylor rule inflation-targeting mechanism that uses the short term interest rate instead of the exchange rate as the benchmark monetary policy instrument. Our simulation results show that the use of a more flexible exchange rate system will reduce volatility in inflation and investment but consumption volatility will increase. Overall, there are neither signi cant welfare gains or losses in the regime shift. Given the highly open and trade …
Sequential Investment, Hold-Up And Strategic Delay, Juyuan Zhang, Yi Zhang
Sequential Investment, Hold-Up And Strategic Delay, Juyuan Zhang, Yi Zhang
Research Collection School Of Economics
We investigate hold-up with simultaneous and sequential investment. We show that if the encouragement effect of sequential complementary investments dominates the delay effect, sequential investment alleviates the underinvestment caused by the hold-up problem. Further, if it is allowed to choose when to invest, strategic delay occurs when the encouragement effect of sequential complementary investments dominates the delay effect.
International Capital Flows And Aggregate Output, Jurgen Von Hagen, Haiping Zhang
International Capital Flows And Aggregate Output, Jurgen Von Hagen, Haiping Zhang
Research Collection School Of Economics
We develop a tractable multi-country overlapping-generations model and show that cross-country differences in financial development explain three recent empirical patterns of international capital flows. Domestic financial frictions in our model distort interest rates and aggregate output in the less financially developed countries. International capital flows help ameliorate the two distortions. International flows of financial capital and foreign direct investment affect aggregate output in each country directly through affecting the size of aggregate investment. In addition, they affect aggregate output indirectly through affecting the composition of aggregate investment and the size of aggregate savings. Under certain conditions, the indirect effects may …
Estimating The Garch Diffusion: Simulated Maximum Likelihood In Continuous Time, Tore Selland Kleppe, Jun Yu, Hans J. Skaug
Estimating The Garch Diffusion: Simulated Maximum Likelihood In Continuous Time, Tore Selland Kleppe, Jun Yu, Hans J. Skaug
Research Collection School Of Economics
A new algorithm is developed to provide a simulated maximum likelihood estimation of the GARCH diffusion model of Nelson (1990) based on return data only. The method combines two accurate approximation procedures, namely, the polynomial expansion of Ait-Sahalia (2008) to approximate the transition probability density of return and volatility, and the Efficient Importance Sampler (EIS) of Richard and Zhang (2007) to integrate out the volatility. The first and second order terms in the polynomial expansion are used to generate a base-line importance density for an EIS algorithm. The higher order terms are included when evaluating the importance weights. Monte Carlo …
Measurement And High Finance, Peter C. B. Phillips, Jun Yu, Eric Ghysels
Measurement And High Finance, Peter C. B. Phillips, Jun Yu, Eric Ghysels
Research Collection School Of Economics
Turbulence in the world of banking and finance over the last two years has riveted media attention on the financial industry, exposing practices, products and risks in the industry to widespread public scrutiny. Questions continue to be asked about the management and regulation of an industry whose performance is now seen to affect the world’s financial health and its prospects as much as it does national savings and individual retirement funds.
Using Financial Econometrics To Measure Risk, Peter C. B. Phillips, Jun Yu, Eric Ghysels
Using Financial Econometrics To Measure Risk, Peter C. B. Phillips, Jun Yu, Eric Ghysels
Research Collection School Of Economics
No abstract provided.
An Asian Response To International Financial Reforms, Hoe Ee Khor, Kim Song Tan
An Asian Response To International Financial Reforms, Hoe Ee Khor, Kim Song Tan
Research Collection School Of Economics
Asia has emerged as a much more important player in the global economy after the recent financial crisis. Together with other emerging market economies, Asia is expected to be a key driver for global economic growth in the near to medium term. Along with this, there is a rising chorus for an “Asian approach” to financial reforms in the region and internationally. There are also calls for Asia to play a bigger role in designing the new architecture for the global financial system.
Off The Cliff And Back? Credit Conditions And International Trade During The Global Financial Crisis, Davin Chor, Kalina Manova
Off The Cliff And Back? Credit Conditions And International Trade During The Global Financial Crisis, Davin Chor, Kalina Manova
Research Collection School Of Economics
We study the collapse of international trade flows during the global financial crisis using detailed data on monthly US imports. We show that credit conditions were an important channel through which the crisis affected trade volumes, by exploiting the variation in the cost of capital across countries and over time, as well as the variation in financial vulnerability across sectors. Countries with higher interbank rates and thus tighter credit markets exported less to the US during the peak of the crisis. This effect was especially pronounced in sectors that require extensive external financing, have limited access to trade credit, or …
Optimal Monetary Policy In A Model With Recursive Preferences, Sungbae An
Optimal Monetary Policy In A Model With Recursive Preferences, Sungbae An
Research Collection School Of Economics
This paper provides a simple and elegance approach for an empirical investigation of a model with Epstein-Zin (1989) preferences. The perturbation method implemented in Dynare is readily applicable for computation of equilibrium and welfare. A stylized new Keynesian economy with sticky prices is analyzed and optimal simple rules are accessed across various types of monetary policy rules.
Simulation-Based Estimation Methods For Financial Time Series Models, Jun Yu
Simulation-Based Estimation Methods For Financial Time Series Models, Jun Yu
Research Collection School Of Economics
This paper overviews some recent advances on simulation-based methods of estimating time series models and asset pricing models that are widely used in finance. The simulation based methods have proven to be particularly useful when the likelihood function and moments do not have tractable forms and hence the maximum likelihood method (MLE) and the generalized method of moments (GMM) are difficult to use. They can also be useful for improving the finite sample performance of the traditional methods when financial time series are highly persistent and when the quantity of interest is a highly nonlinear function of system parameters. The …
Monetary Policy Cooperation To Support Asian Economic Integration, Hwee Kwan Chow, Peter Nicholas Kriz, Roberto S. Mariano, Augustine H. H. Tan
Monetary Policy Cooperation To Support Asian Economic Integration, Hwee Kwan Chow, Peter Nicholas Kriz, Roberto S. Mariano, Augustine H. H. Tan
Research Collection School Of Economics
This paper considers the form of monetary policy coordination and regional exchange rate arrangement that would best support economic and financial integration in East Asia. In view of the region's economic diversity, we propose a graduated program of informal policy cooperation from weak forms of cooperation to more intensive modes of cooperation such as the adoption of common monetary policy objectives. An array of informal monetary arrangements rooted to the degree of institutional development can improve the effectiveness of both sovereign and regional institutions, and promote integration in East Asia. Drawing upon the European experience with the Exchange Rate Mechanism …
The Optimal Degree Of Reciprocity In Tariff Reduction, Pao Li Chang
The Optimal Degree Of Reciprocity In Tariff Reduction, Pao Li Chang
Research Collection School Of Economics
This article clari.es the roles played by trade policy, in contrast with iceberg transport cost, in the popular setting of Melitz (2003), and characterizes the optimal reciprocal trade policy in such a setting. I show that import tariffs and iceberg transport cost are not equivalent in the strength of their trade-restricting e¤ects and their welfare implications. With all the con.icting effectsof import tari¤s on welfare considered, the optimal degree of reciprocity in multilateral tari¤ reduction turns out to be free trade.
Risking Returns: Moving From Public To Private Equity, Aurobindo Ghosh
Risking Returns: Moving From Public To Private Equity, Aurobindo Ghosh
Research Collection School Of Economics
The notion of risk identifies a project that matches with the risk appetite of an entrepreneur not necessarily the investors. This can explain why entrepreneurs would start up companies but it cannot explain why ex-post the investors continue, given that a diversified portfolio of publicly traded assets could potentially generate similar return with lower risk. We re-evaluate the evidence through performance measures using relative probability distributions of public and private equity funds, and identify the nature of the deviations. We observe that the heterogeneity in different investor classes are greatly reduced using standard covariates to identify the choice between public …
Managing Capital Flows: The Case Of Singapore, Hwee Kwan Chow
Managing Capital Flows: The Case Of Singapore, Hwee Kwan Chow
Research Collection School Of Economics
The resurgence of private capital inflows into Asia in recent years has raised the question of whether the region is susceptible to yet another financial crisis. While a sudden large-scale reversal of capital flows is not likely to result in a liquidity crunch or balance of payments crisis, the attendant sharp corrections in asset prices will have an adverse impact on the economy particularly through indirect channels. We present, in this study, Singapore’s experience in managing the risks posed by capital flows as well as the retention of control over exchange rates and monetary conditions. It is the overall package …
Dating The Timeline Of Financial Bubbles During The Subprime Crisis, Peter C. B. Phillips, Jun Yu
Dating The Timeline Of Financial Bubbles During The Subprime Crisis, Peter C. B. Phillips, Jun Yu
Research Collection School Of Economics
A new recursive regression methodology is introduced to analyze the bubble characteristics of various financial time series during the subprime crisis. The methods modify a technique proposed in Phillips, Wu, and Yu (2011) and provide a technology for identifying bubble behavior with consistent dating of their origination and collapse. The tests serve as an early warning diagnostic of bubble activity and a new procedure is introduced for testing bubble migration across markets. Three relevant financial series are investigated, including a financial asset price (a house price index), a commodity price (the crude oil price), and one bond price (the spread …
Explosive Behavior In The 1990s Nasdaq: When Did Exuberance Escalate Asset Values?, Peter C. B. Phillips, Yangru Wu, Jun Yu
Explosive Behavior In The 1990s Nasdaq: When Did Exuberance Escalate Asset Values?, Peter C. B. Phillips, Yangru Wu, Jun Yu
Research Collection School Of Economics
A recursive test procedure is suggested that provides a mechanism for testing explosive behavior, date-stamping the origination and collapse of economic exuberance, and providing valid confidence intervals for explosive growth rates. The method involves the recursive implementation of a right-side unit root test and a sup test, both of which are easy to use in practical applications, and some new limit theory for mildly explosive processes. The test procedure is shown to have discriminatory power in detecting periodically collapsing bubbles, thereby overcoming a weakness in earlier applications of unit root tests for economic bubbles. Some asymptotic properties of the Evans …
Monetary Policy And Asset Prices In A Small Open Economy: A Factor-Augmented Var Analysis For Singapore, Hwee Kwan Chow, Keen Meng Choy
Monetary Policy And Asset Prices In A Small Open Economy: A Factor-Augmented Var Analysis For Singapore, Hwee Kwan Chow, Keen Meng Choy
Research Collection School Of Economics
The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary policy based on standard VAR models, unfortunately, is often hindered by the use of sparse information sets. To better reflect the extensive information monitored by Singapore’s central bank, including global economic indicators, we augment a monetary VAR model with common …
Foreign Direct Investment And Foreign Portfolio Investment Under Asymmetric Information, Ruanjai Suwantaradon
Foreign Direct Investment And Foreign Portfolio Investment Under Asymmetric Information, Ruanjai Suwantaradon
Research Collection School Of Economics
This paper develops a model of international capital flows when there is asymmetric information between foreign investors and domestic managers. Direct investors have a direct influence on the management, thus overcoming agency and information problems. This information advantage, however, comes at the cost of having to acquire management expertise. The tradeoff between management costs and the costs of asymmetric information consequently determines the level and composition of a country’s international capital flows. Analyzing how this tradeoff changes with economic conditions in a country, the model can qualitatively capture the experiences of many crisis countries during the 1990s. Specifically, the model …
Simulation-Based Estimation Of Contingent-Claims Prices, Peter C. B. Phillips, Jun Yu
Simulation-Based Estimation Of Contingent-Claims Prices, Peter C. B. Phillips, Jun Yu
Research Collection School Of Economics
A new methodology is proposed to estimate theoretical prices of financial contingent claims whose values are dependent on some other underlying financial assets. In the literature, the preferred choice of estimator is usually maximum likelihood (ML). ML has strong asymptotic justification but is not necessarily the best method in finite samples. This paper proposes a simulation-based method. When it is used in connection with ML, it can improve the finite-sample performance of the ML estimator while maintaining its good asymptotic properties. The method is implemented and evaluated here in the Black-Scholes option pricing model and in the Vasicek bond and …
Subnational Credit Rating: A Comparative Review, Lili Liu, Kim Song Tan
Subnational Credit Rating: A Comparative Review, Lili Liu, Kim Song Tan
Research Collection School Of Economics
This paper surveys methodological issues in subnational credit ratings and highlights key challenges for developing countries. Subnational borrowing from capital markets has been on the rise owing to fiscal decentralization and demand for infrastructure investments. A prerequisite for accessing capital markets, subnational credit ratings have also emerged as a part of broader reform for fiscal sustainability. They facilitate a more transparent budgetary and financial management system. The global financial crisis makes subnational credit ratings more relevant, as they contribute to fiscal risk evaluations and fiscal adjustment. In addition to subnationals’ own credit strength, the creditworthiness of the sovereign and the …
Asian Currency Baskets: An Answer In Search Of A Question?, Charles Adams, Hwee Kwan Chow
Asian Currency Baskets: An Answer In Search Of A Question?, Charles Adams, Hwee Kwan Chow
Research Collection School Of Economics
This paper considers how a regional currency basket and the associated divergence indicators could be used in official surveillance. Recently, proponents of Asian currency baskets have referred to the role the ECU played in constructing exchange rate divergence indicators in Europe as evidence of the intrinsic usefulness of currency baskets for exchange rate monitoring. We show in this paper a number of problems with the use of regional currency-basket based divergence indicators. First, at a technical level, such indicators involve tracking regional exchange rates against a moving currency basket and can obscure underlying movements in bilateral exchange rates. Second, currency …
An Empirical Analysis Of Stock Market Integration: Comparison Study Of Singapore And Malaysia, Zheng Yi, Swee Liang Tan
An Empirical Analysis Of Stock Market Integration: Comparison Study Of Singapore And Malaysia, Zheng Yi, Swee Liang Tan
Research Collection School Of Economics
Using a GARCH (1,1) model, this paper compares the extent to which financial sector liberalization in Singapore and Malaysia each has led to integration of its domestic equity market with external markets. The results show that the level of integration of the domestic markets with the external markets is higher when MSCI regional and global data are used, as compared to when individual country data are used to proxy regional and global markets. Inferences are made about the preferred pace of liberalization in Singapore, as well as, the impact of the Asian financial crisis and capital control measures imposed in …
Discrete Choice Modeling With Nonstationary Panels Applied To Exchange Rate Regime Choice, Sainan Jin
Discrete Choice Modeling With Nonstationary Panels Applied To Exchange Rate Regime Choice, Sainan Jin
Research Collection School Of Economics
This paper develops a regression limit theory for discrete choice nonstationary panels with large cross section (N) and time series (T) dimensions. Some results emerging from this theory are directly applicable in the wider context of M-estimation. This includes an extension of work by Wooldridge [Wooldridge, J.M., 1994. Estimation and Inference for Dependent Processes. In: Engle, R.F., McFadden, D.L. (Eds.). Handbook of Econometrics, vol. 4, North-Holland, Amsterdam] on the limit theory of local extremum estimators to multi-indexed processes in nonlinear nonstationary panel data models. It is shown that the maximum likelihood (ML) estimator is consistent without an incidental parameters problem …
Using High-Frequency Transaction Data To Estimate The Probability Of Informed Trading, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitchell Warachka
Using High-Frequency Transaction Data To Estimate The Probability Of Informed Trading, Anthony S. Tay, Christopher Ting, Yiu Kuen Tse, Mitchell Warachka
Research Collection School Of Economics
This paper applies the asymmetric autoregressive conditional duration (AACD) model of Bauwens and Giot (2003) to estimate the probability of informed trading (PIN) using irregularly spaced transaction data. We model trade direction (buy versus sell orders) and the duration between trades jointly. Unlike the Easley, Hvidkjaer, and O'Hara (2002) approach, which uses the aggregate numbers of daily buy and sell orders to estimate PIN, our methodology allows for interactions between consecutive buy-sell orders and accounts for the duration between trades and the volume of trade. We extend the Easley–Hvidkjaer–O'Hara framework by allowing the probabilities of good news and bad news …
Misaligned Incentives And Mortgage Lending In Asia, Richard Green, Roberto S. Mariano, Andrey Pavlov, Susan Wachter
Misaligned Incentives And Mortgage Lending In Asia, Richard Green, Roberto S. Mariano, Andrey Pavlov, Susan Wachter
Research Collection School Of Economics
This paper provides a conceptual basis for the price discovery potential for tradable market instruments and specifically the development of mortgage securitization in Asia and the potential dangers of such markets. Nonetheless we argue for the potential importance of securitization in Asia because of its possible role in increasing transparency of the financial sector of Asian economies. We put forth a model explaining how misaligned incentives can lead to bank generated real estate crashes and macroeconomic instability, with or without securitization under certain circumstances. We examine the banking sector’s performance in Asia compared to securitized real estate returns, to provide …
Analyzing And Forecasting Business Cycles In A Small Open Economy: A Dynamic Factor Model For Singapore, Hwee Kwan Chow, Keen Meng Choy
Analyzing And Forecasting Business Cycles In A Small Open Economy: A Dynamic Factor Model For Singapore, Hwee Kwan Chow, Keen Meng Choy
Research Collection School Of Economics
A dynamic factor model is applied to a large panel dataset of Singapore’s macroeconomic variables and global economic indicators with the initial objective of analyzing business cycles in a small open economy. The empirical results suggest that four common factors are present in the quarterly time series, which can broadly be interpreted as world, regional, electronics and domestic economic cycles. The estimated factor model explains well the observed fluctuations in real economic activity and price inflation, leading us to use it in forecasting Singapore’s business cycles. We find that the forecasts generated by the factors are generally more accurate than …
Maximum Likelihood And Gaussian Estimation Of Continuous Time Models In Finance, Peter C. B. Phillips, Jun Yu
Maximum Likelihood And Gaussian Estimation Of Continuous Time Models In Finance, Peter C. B. Phillips, Jun Yu
Research Collection School Of Economics
This paper overviews maximum likelihood and Gaussian methods of estimating continuous time models used in finance. Since the exact likelihood can be constructed only in special cases, much attention has been devoted to the development of methods designed to approximate the likelihood. These approaches range from crude Euler-type approximations and higher order stochastic Taylor series expansions to more complex polynomial-based expansions and infill approximations to the likelihood based on a continuous time data record. The methods are discussed, their properties are outlined and their relative finite sample performance compared in a simulation experiment with the nonlinear CIR diffusion model, which …
Future Fiscal And Budgetary Shocks, Hian Teck Hoon, Edmund S. Phelps
Future Fiscal And Budgetary Shocks, Hian Teck Hoon, Edmund S. Phelps
Research Collection School Of Economics
We study the effects of future tax and budgetary shocks in a non-monetary and possibly non-Ricardian economy. An (unanticipated) temporary labor tax cut to be effective on a given future date—a delayed “debt bomb”—causes at once a drop in the (unit) value placed on the firms' business asset, the customer, with the result that share prices, the hourly wage, and employment drop in tandem. This paradox of reduced activity through announcement of future “stimulus” does not hinge on an upward jump of long interest rates. A future tax-rate cut lacking a “sunset” provision has the same negative effects.