The Singapore Economic Review

The case for stabilizing China's exchange rate against the dollar is strong. Before 2005 when the yuan/dollar rate was credibly fixed, it helped anchor China's domestic price level. But gradual RMB appreciation from July 2005 to July 2008 created a "one-way-bet" that disordered China's financial markets in two respects: (i) no private capital outflows to finance China's huge trade surplus leading to an undue build up of official exchange reserves and erosion of monetary control, and (ii) a breakdown of the forward exchange market in 2007–2008 so that exporters could no longer get trade credit — probably worsening the severe slump in Chinese exports. But after July 2008, the credit crunch induced an unexpected unwinding of the dollar carry trade leading to a sharp appreciation in the dollar's effective exchange rate. The People's Bank of China (PBC) then stopped RMB appreciation against the dollar. China's forward exchange market was restored and monetary control regained. Now the PBC can better support the fiscal stimulus by promoting a parallel expansion of bank credit. But, since March 2009, the fall in the dollar (with the RMB tied to it) again threatens to undermine the yuan/dollar rate and China's monetary stability.

This study investigates the determinants of savings behavior in India and the direction of causality between savings and income per capita as these have important implications for development policy. We estimate long-run savings functions for India using modern co-integration procedures. Our empirical results show that higher income per capita and improved access to banking facilities significantly improves savings in India. On the other hand, foreign savings and public savings have negative impact on private and household savings. We also carry out an analysis of the direction of causality between savings and income. The results suggest that there is a one-way causation from income per capita to the savings rate.

Economic analysis of law has been used for policy analysis and to explain legal doctrine. It can also be used by a lawyer in providing a legal opinion. This paper provides an example of how economic analysis can be used in giving a legal opinion. The example is an opinion on the likelihood that investors would be held personally liable for debts arising in the conduct of businesses carried on through a business income trust. Since there is no direct economic analysis of this question in the existing literature, the paper uses the economic analysis of the limited liability of corporations. It uses this analysis because it focuses on the same policy question of whether investors should be made personally liable for debts incurred in the carrying on of a business. The paper reviews the economic analysis of the limited liability of corporations. It then considers how this analysis may extend to business trusts and to business income trusts.

Services form a larger part of the Singapore economy. However, it is difficult to analyze the exchange rate impact on services due to the lack of price data. Regression of output or export on exchange rate, while highly intuitive, is likely to suffer from the endogeneity problem since Singapore's exchange rate is used as a counter-cyclical policy tool. This results in inconsistent estimates. I propose a novel approach to overcome these limitations by using Hong Kong as a control for Singapore's economy to implement a pseudo "difference-in-difference" method, exploiting time variation in output, to achieve consistent estimates.

The precautionary principle was included in 1992 in the Rio Declaration and is part of important international agreements such as the Convention on Biological Diversity. Yet, it is not a straight-forward guide for environmental policy because many interpretations are possible as shown in this paper. Its different economic versions can result in conflicting policy recommendations about resource conservation. The principle does not always favor (natural) resource conservation (e.g., biodiversity conservation) although it has been adopted politically on the assumption it does. The principle's consequences are explored for biodiversity conservation when the introduction of new genotypes is possible.

The study attempts to re-investigate the possibility of emergence of a single currency area in East Asian (EA) countries by comparing both pre- and post-financial crisis periods. Using variance decomposition and impulse analyses, we investigated whether the selected EA economies — Hong Kong, Indonesia, Korea, Malaysia, the Philippines, and Singapore — are heavily segmented or instead integrated by focusing on the three different shocks, namely global-, regional-, and country-specific shocks. This paper finds that most economies could be described as heavily segmented, especially during the pre-crisis period (before July 1997). However, over time, the degree of segmentation experienced by some of these economies has declined significantly, particularly that of Hong Kong, Korea, and Singapore. The analyses also indicate that few economies, especially Indonesia and the Philippines, are being influenced by the performance of the Japanese economic growth to a greater extent than they were previously.

The continuation of China's remarkable economic growth will depend on continued increases in electricity supply. China has commenced a program of electricity sector restructuring, with the announced aim of relying on markets and competition to provide incentives for attracting private investment and encouraging efficiency. However, a close examination of the generation markets being created suggests that truly free wholesale prices are likely to be both high and volatile. This may be the reason that these prices have not yet been freed — and it may not bode well for true market liberalization in the future.

The purpose of this paper is to examine Field's (1989) proposition in a multisector general equilibrium model with imperfect capital mobility. The effects of different fiscal policies on the equilibrium rate of urban unemployment are also examined. The main findings are (i) more efficient on-the-job search from the rural sector raises equilibrium urban unemployment rate whereas (ii) increased job search efficiency from the urban informal sector lowers this rate. Aditionally, (iii) urban price subsidy policy lowers the equilibrium urban unemployment rate, and (iv) rural subsidy policy raises this rate.