The Singapore Economic Review

Intermittently, Singapore suffers from severe air pollution in periods of intense forest and peatland fires on neighboring South-Asian islands. A recent American Economic Review article modeled the causal relationships between fire intensity in Indonesia and air pollution (PSI) in Singapore, and between PSI and health clinic visits in Singapore. We find serious flaws in the quantitative assessment of these relationships. Attempts are made to repair these using the same classic methodology and data, but also by alternative methods requiring less speculative assumptions. Although actually more detailed data are required, there are some results produced which seem more credible.

To address the lack of awareness on environmental values, this study estimates the environmental value of mountain ranges (Jeongmaek) connected to the Baekdudaegan mountain system in South Korea. Seven Jeongmaek are studied during 2011–2016 using a questionnaire survey and the contingent valuation method. Based on willingness to pay (WTP) for biodiversity, this study finds that the lowest estimated WTP was KRW 5813 for Geumbuk and Hannam-Geumbuk Jeongmaek, and the highest value was KRW 120,471 for Hanbuk Jeongmaek. These differences in WTP appear to be significantly determined by education level and number of visits of respondents.

Energy consumption and environmental pollution are along with urban sprawling, while the impact of urbanization on energy and environment is quite controversial. The study of urbanization and energy-environmental efficiency provides a new perspective to understand the correlation between urbanization, energy consumption and environment. In this paper, a Directional Distance Function-Data Envelopment Analysis (DDF-DEA) model is employed to investigate provincial energy-environment efficiency in China from 1999 to 2017. Then the mechanism of urbanization substantially affecting the energy-environment efficiency is empirically examined from the perspective of government and market, respectively. The results indicate that China’s energy-environmental efficiency is improving, but regional differences exist and have widened since 2005; the overall impact of urbanization on China’s energy-environment efficiency is negative while the mechanism differs between different regions. Specifically, government-dominated urbanization has promoted energy-environment efficiency in the eastern region, while has a negative impact in the central and western regions; market-led urbanization has a limited positive impact on energy-environment efficiency. These conclusions proved to be robust, and are of great significance for policymakers to take full use of the positive externality of urbanization to promote the energy-environment efficiency and improve the environment.

Measuring markups in restaurant services is a difficult task. Although the sales price is observed, cost of the product served is unobserved. In this study, we employ an intuitive framework and focus specifically on markups on soft drinks. We analyze the determinants of markup on soft drinks in restaurants over 2006–2014. Results suggest that current demand conditions (net minimum wage, output gap), major cost items (food and energy prices, exchange rate) and economic uncertainty (exchange rate volatility) significantly affect markups. This strategy enables the detection of relevant factors which may not be possible to detect in other settings.

This study aims to understand how local enterprises establish brand awareness through tough entrepreneurship as well as focus on international markets so as to inject new ideas and to promote brand value. Examining this issue experimentally on B coffee company with data from Taiwan and China during 2010 to 2012, we use Network Meta-Frontier Data Envelopment Analysis to estimate the cross-strait performances of this firm in order to examine their differences and to propose direction for subsequent improvement. The empirical results are as follows. First, from 2010 to 2012 the channel scale and output in Taiwan is superior to that in China. Second, the performance of China’s channels is on the decline with large fluctuations, whereas Taiwan’s channels are getting better. Third, analyzing the average efficiency value of both sides comprehensively, we find that Taiwan’s channels perform more steadily due to a longer time of establishment and more mature allocation.

We examine the determinants of bank capital structure using a large sample of banks in the world. We find that banks determine their capital structure in much the same way as non-financial firms, except for growth opportunities. We also provide evidence that country-level factors, such as the legal system, bank-specific factors and economic conditions influence banks’ capital decisions through their impacts on bankruptcy costs, agency costs, information asymmetry and liquidity creation. The results show that, besides the direct effects, there are indirect impacts of country-level factors on the decision of bank capital. Our results have potential policy implications for the on-going regulatory reform.

The development in information technology results in a significant increase in bank competition. The question of whether increased competition improves bank profitability and risk reduction is important in many aspects. This paper analyzes the impact of competition on profitability and risk in the context of Vietnam using OLS estimator on data set of 37 Vietnamese commercial banks. The main results present that banks with a higher competition index tend to have higher profitability which is measured by ROE and NIM. In addition, our empirical results also show that banks tend to take on more risk when facing increased competition.

Given considerable changes in the Vietnamese banking environment brought about by significant reforms towards liberalization during the last two decades, this study investigates the evolution of competition and efficiency, compares the competition and efficiency of state-owned banks to joint-stock banks, and then tests the “quiet life” hypothesis in this industry over the period 2000–2014. This study employs the efficiency-adjusted Lerner index (i.e., market power) to capture competition, and the cost efficiency estimated by a Fourier-flexible function stochastic frontier analysis (SFA) to capture bank efficiency. This study firstly finds a slight improvement of competition and cost efficiency in the Vietnamese banking sector over the analysis period. Secondly, there are no significant differences in competition and cost efficiency level between state-owned and joint-stock banks. Thirdly, a positive causality running from competition to cost efficiency is documented, providing evidence of supporting the “quiet life” hypothesis. Finally, positive efficiency effects of the banks’ capital ratio and size are found, while insignificant impacts of the growth of GDP per capita and 2007 global financial crisis were observed. The results are strongly robust to a variety of tests. The findings suggest pro-competition, pro-capitalization and pro-size expansion policies in the Vietnamese banking sector if targeting at improving the cost efficiency of Vietnamese banks.

This study applied a multivariate panel Granger causality test to examine the causal relationship between peer-to-peer lending (P2PL) and bank lending (BL) in China’s eight major regions for the period from 2014M01 to 2019M12. The empirical results of this paper support evidence for the P2PL leading hypothesis in regions such as Jiangsu and Hubei while the BL leading hypothesis relationship supports the evidence for regions such as Zhejiang and Shanghai. In addition, there is an interactive causal relationship between P2PL and BL in a region such as Shandong. However, the result of a neutrality hypothesis supports three of these eight major regions (Guangdong, Beijing and Sichuan). The findings of this paper provide important policy implications for China’s eight major regions as well as business sectors in the banking industry for understanding and predicting market conditions.

Effective information disclosure is the cornerstone of sustainable operation of the capital market. In the IPO market, whether public information in the prospectus can be fully captured by investors largely depends on the quality of valuation-relevant information. Based on Chinese prospectuses, we create five unique indicators to measure the information quality and examine the relationship between information quality and IPO underpricing. We find that high quality of information disclosure results in less underpricing because they relieve serious information asymmetry between issuing companies and investors. We provide a new method to supervise and improve the quality of non-financial information disclosure.

We investigate the compensation plans during China’s split share structure reform, a unique event that affected the entire market and in which investors’ opinions over stock values can be measured. We find that anchoring effects and accruals biased investors’ valuations. Although previous studies have observed investor’s biased belief from their irrational trading behavior, our study provides direct evidence of their biases regarding stock values. In particular, the compensation ratio was lower for stocks with prices closer to the historical high and further from the 52-week high, for stocks with higher accruals and for stocks with higher misvaluations relative to industry peers. In addition, we find a strong herding effect for the compensation ratios of firms that had already completed the reform. These results are robust to control for the effects of risk sharing, differences in bargaining power, the price impact from the increased number of tradable shares and liquidity.

This paper examines whether broader money supply (M2) and interest rate as two monetary policy tools may have differently affected housing prices in China. Empirical results show that there is a co-movement between housing prices and M2 in the short run and it becomes more pronounced after 2006 in the medium run. In addition, generally M2 positively affects housing prices. This supports the asset price channel which indicates that an easing monetary policy offers ample liquidity and results in raising the housing prices. The excess liquidity after 2008 spread to housing market, resulting in too much money chasing relatively few assets and triggering a surge in housing prices. On the other hand, we observe that co-movement between housing prices and interest rate is not very evident in most time. Moreover, we find that interest rate has a positive effect on housing prices which is not consistent with the user cost approach and indicates that a contracting monetary policy is not effective in curbing housing market. Not completely liberalized interest rate system and the high return on housing investments reduce the impact of interest rate on housing prices. These findings indicate that money supply is more effective than interest rate as channel to control the housing prices in China. The results are helpful for the scientific formulation of monetary policy for reasonable regulation of the market.

Motivated by the idea that substantive reforms in China always happen intermittently and randomly, this paper constructs an RBC model, augmented with a shock that reflects the role of reforms and its randomly occurring character, to investigate the macroeconomic effects of enhancing the reform intensity. An increase in the average intensity of reforms leads to a higher economic growth rate permanently and provides sustainable support for economy when the potential growth rate declines. But it decreases the ergodic steady state of the detrended output, and this could have an adverse effect on economic growth in the short run.

In this paper, we use the improved direct method and improved residual method to re-measure the annual scale and to measure the quarterly scale of the short-term international capital flows based on the Chinese Balance of Payment table. At the same time, we use the residual method to estimate the monthly scale of the Chinese short-term international capital flows as well. Then we explain and test these calculated results. Next we apply the results to the lead–lag analysis of macro-economy. To judge whether the short-term international capital flow is a leading indicator, we apply the Kullback–Leibler information method and cross-correlation analysis method to analyze the lead–lag relationship between the short-term international capital flows and macro-economy by selecting some representative macroeconomic indicators as a reference. Our empirical analysis shows that in China, the short-term international capital flow is a leading indicator to macro-economy and a coincident indicator to Purchasing Managers’ Index. In the end, we give some conclusions and policy proposals.

This paper investigates ways of identifying and predicting currency crises in world-wide markets, with special focus on 1997 and 2008 currency crises. A novel Markov switching method is proposed for identifying currency crisis based on two states model, the turmoil state and tranquil state, which is the most suitable model considering the balance between model performance and computational demand. Compared with previous Markov switching currency crisis studies, the contribution of this paper comes from several ways. First, the dependent variable is different. While other papers use the exchange rate directly or the estimation of devaluation probability, this study uses the market pressure index calculated from nominal exchange rate and foreign reserves. Secondly, we allow different volatilities in different states, whereas other papers assume the same volatility in two states. Thirdly, our transition probabilities are constant rather than time-varying. The model shows evidence of state switching before crisis in many different currency markets. Lastly, we compare the Markov switching method with the widely used probit model which proposed an early warning system in terms of forecasting performance, and the empirical results show that the novel Markov switching method performs better than the probit model.

This paper examines the impact of tax reform on the economic growth of India over the period 1975–2017. In order to measure the impact of tax reform on the economic growth, we have used various econometric tools like Maki and combined cointegration tests and the rolling-window causality test in this study. The study revealed that a stable long-run parameter stability relationship exists the series on tax reform but unable to obtain the short-run relationship. Results also revealed that growth-led taxation effects and tax-led-growth do not exist in India. Hence, India needs more policies which will help to remove inefficiencies created by the existing heterogeneous taxation system, revenue rate and inclusion of petroleum products, electricity, liquor and real estate and policymakers should adopt some policies for direct tax which reduce the imbalance in class.

This paper provides a quantitative measure of the concept of trade policy space, at the macroeconomic level, and examines its impact on export product diversification. Trade policy space has been defined as the room of manoeuvre available to a government once its current trade policy is depurated from the impact of structural domestic and international factors. The analysis has been carried out using an unbalanced panel dataset comprising 165 countries (both developed and developing countries) over the period 2002–2015. Results suggest that trade policy space is positively associated with export product diversification, and the higher countries’ development level, the greater is the magnitude of the positive effect of trade policy space on export product diversification. The analysis further shows for recipient-countries of Aid for Trade (AfT) flows that trade policy space is complementary with AfT inflows in inducing export product diversification. In particular, the higher the amounts of AfT inflows that accrue to these countries, the greater is the positive impact of trade policy space on export product diversification in AfT recipient-countries.

This paper presents a simple model to address why openness to trade increases the dispersion in wages, unemployment, and capital intensity. However, the dispersion is stronger for developing countries. We argue that the export-oriented policy that most developing countries have widely adopted in recent decades, amplifies the dispersion in these countries. This paper also helps explain the conflicting evidence between two groups of developing countries: East Asian and Latin American. In comparison to the latter, the former has a track record since the 1960s of a miraculous performance in narrowing wage inequality and unemployment by practicing export-oriented policies.

The increase in income, the improvement of social security and the decline in the desire for fertility in urban residents have been extremely important social and economic phenomena in China over the past three decades. However, there have been few studies of China’s situations because of the use of long-term birth control. An analysis based on the framework of lifetime utility maximization for individuals indicated that income and social security have substitution effects on the number of births. This study conducts an empirical analysis with data extracted from the Chinese General Social Survey (CGSS). The results show that an increase in income lowers the willingness for fertility, and the endowment insurance system with subsidies lowers beneficiaries’ fertility intentions. Similarly, an increase in income and the improvement of social security decrease urban residents’ “two-child” fertility intentions significantly. Thus, although the steady growth of the economy and the continuous improvement of the social security system have provided the opportunity to relax China’s population policies, the substitution effect of income and social security on fertility intentions also needs to be considered.