The Singapore Economic Review

Given the pervasive evidence that people typically value changes in terms of comparisons to a reference state, and that they commonly value losses and reductions of losses more than gains, current risk assessment and valuation practice is likely to lead to systematic bias and distorted guidance. Willingness to pay estimates of the value of reducing the risk of harm are, for example, likely to understate the value of actions to bring this about. Differences in valuations resulting from different measures are illustrated, and the criteria for the choice between measures of the value of positive and negative changes in risk are demonstrated with results from a new risk study in China.

This paper examines the underlying parity conditions upon which real interest parity (RIP) is predicted for some Asian countries relative to the U.S. and Japan over a period (1978–2009) containing significant changes using the multivariate cointegration procedure of Johansen et al. (2000) that allows for up to two pre-determined breaks. Each parity condition is examined to determine which is responsible for the rejection of RIP. The results suggest that the Fisher hypothesis is the least likely to violate RIP, whereas uncovered interest parity (UIP) appears to be most commonly violated. Stability tests suggest that the RIP relationship has been stable in most cases and that the impact of the Asian crisis and the Plaza Accord appears to be transitory, and that the RIP relationships have strengthened in the aftermath of the 1997–1998 Asian crisis.

In this paper, we attempt to determine whether the life-cycle income (LCI) hypothesis can explain movements in the national savings rate using the panel data of countries and the semi-nonparametric approach. While relating movements in the population density function to movements in the national savings rate, we are able to estimate the age response function with a high level of precision, and the estimated age response function is hump-shaped, which is generally consistent with the prediction from the LCI hypothesis. Running time-series regressions separately for individual countries, we also demonstrate that the estimated age response functions are consistent with the LCI hypothesis in a large proportion of countries, despite limited observations in a variety of countries. Finally, our time-series and cross-sectional analysis results imply that the LCI hypothesis is more likely to hold in a country wherein the growth rate of per capita GDP and the growth rate of population are high.

The issue of asymmetry and nonlinearity in the context of economic voting was proposed as far back as the 1970s. The aim of this paper is to revisit the economic voting phenomenon by investigating the asymmetric cointegration between government popularity and economic conditions in Taiwan over the period from 1992 to 2007. We employ an advanced threshold autoregressive model and find strong evidence of threshold cointegration relationships between our observed variables. Furthermore, an asymmetric error correction model indicates that voters use different economic indicators to evaluate government popularity in different regimes and the speed of adjustment to the long-run equilibrium is more rapid in the lower regime and slower in the higher regime. Finally, the evidence shows that the economic voting behavior is supported by the presence of the threshold effects. Based on the nonlinear, asymmetric and threshold effects, we are able to provide several critical implications concerning the governance of the incumbent political party, particularly, in relation to the promotion of economic policy aimed at improving its popularity.

Most of the studies on the poverty impact of economic shocks as well as policy reforms assumed the poverty line as a fixed line; thus, the poverty outcome of shocks may underestimate (overestimate) and mislead in policy guidance. This research aims at empirically investigating the difference of poverty outcome between applying a fixed and an endogenous poverty line. Applying computable general equilibrium microsimulation (CGE-MS), this study has empirically proven that, if a fixed poverty line is applied, the poverty impact of economic shocks which significantly increase (decrease) price will always be underestimated (overestimated). This study empirically found that there is a 0.316 percentage point difference in the poverty outcome between applying the endogenous poverty line and the fixed poverty line when analyzing the impact on poverty in Indonesia of a doubling in the imported soybean price. Supposing the fixed poverty line, the poverty rate will increase by 0.167 percentage points, while supposing the endogenous poverty line, the poverty rate will increase by 0.483 percentage points. Therefore, applying either an endogenous or a fixed poverty line will have a different policy implication. This study strongly suggested that the endogenous poverty line should be applied when analyzing the poverty impact of shocks due to the precision in outcomes.

Developing countries could be facing two linked trends that are potentially detrimental to their development prospects: outmigration of high-skilled professionals and the potential decline in remittances as migrants with higher skills may be less likely to remit or may remit less if they do. This paper examines this policy issue by empirically analyzing a cross-national dataset spanning 70 countries during the period 1985–2000, as well as a country-specific dataset for the Philippines. It finds little evidence that high-skilled migration is linked to lower remittances at the aggregate level. This finding coheres with more recent studies leveraging microlevel data.

Relative population growth affects relative prices through the so-called Balassa–Samuelson (BS) mechanism and that in turn impacts PPP. This paper empirically investigates the relationship between the PPP exchange rate and relative population growth in a panel of 80 selected countries. Following the BS hypothesis, this paper argues that relative population growth affects nominal wages that impact price levels and thereby impacts PPP. Using panel cointegration and fully modified ordinary least square (FMOLS), the empirical results show that there is a stable relationship between PPP exchange rate and relative population growth in the long run. These empirical findings suggest that population growth have an important role in exchange rate determination through PPP.