The Singapore Economic Review

Most literature works on estimating treatment effects assume that the observed data are either under the specific “treatment” or not. However, in many cases, the observed data could be subject to multiple treatments. We propose to combine econometric methods developed for different purposes to disentangle the multiple treatment effects. We illustrate this strategy by considering the impact of global pandemic v.s. the strictest “lockdown” policy of Hubei, China implemented in January, 2020. We show that although the strictest “lockdown” policy quickly contained the spread of COVID-19, it also inflicted huge economic loss on Hubei economy. It lowered Hubei GDP by about 37% compared to the level had there been no “lockdown” under the pandemic. However, even though Hubei economy managed to recover from the “lockdown”, it could not escape the global impact of pandemic. Its economy is still about 90% of the level had there been no pandemic.

AI artificial intelligence brings about new quantitative techniques to assess the state of an economy. Here, we describe a new measure for systemic risk: the Financial Risk Meter (FRM). This measure is based on the penalization parameter (λ) of a linear quantile lasso regression. The FRM is calculated by taking the average of the penalization parameters over the 100 largest US publicly-traded financial institutions. We demonstrate the suitability of this AI-based risk measure by comparing the proposed FRM to other measures for systemic risk, such as VIX, SRISK and Google Trends. We find that mutual Granger causality exists between the FRM and these measures, which indicates the validity of the FRM as a systemic risk measure. The implementation of this project is carried out using parallel computing, the codes are published on www.quantlet.de with keyword  FRM. The R package RiskAnalytics is another tool with the purpose of integrating and facilitating the research, calculation and analysis methods around the FRM project. The visualization and the up-to-date FRM can be found on hu.berlin/frm.

A growing volume of studies indicate that the information asymmetry problem is a serious issue which significantly hinders stock market development. This problem is more pronounced in emerging markets with weak institutions. The domination of large shareholders in a firm might be a cause of information asymmetry because they are commonly believed to have access to private and value-relevant information. The current paper offers insight into the relationship between multiple large shareholder ownership and stock market information asymmetry in the context of Vietnam, an important emerging market. Employing fixed effects and GMM estimators for a panel data sample of firms listed on the Ho Chi Minh City stock exchange covering the period 2007–2015, the results suggest that the concentration of large shareholder ownership is positively and significantly associated with information asymmetry. This finding has strong implications for policy making process in promoting stock market development.

This study examines the directional accuracy of Singapore’s macroeconomic forecasts by professional forecasters, government agencies (i.e., central bank and Ministry of Trade and Industry, MTI), and international organizations. The results show that government agencies provide the most directionally accurate forecasts, suggesting that the macroeconomic and monetary policies are effective. Current-year forecasts are generally directionally accurate, with disparities among forecasters for next-year forecasts. Regarding GDP growth, the MTI and International Monetary Fund (IMF) provide directionally accurate forecasts up to four quarters ahead, whereas other forecasters provide them for at most three quarters ahead. For consumer price index inflation, except for the IMF, all others provide directionally accurate forecasts up to four quarters ahead.

This paper examines the effect of capital inflows on fiscal deficit in an emerging economy of Pakistan. To obtain this objective, a fiscal deficit model is estimated using annual data for the period 1984–2017. The model is estimated using Generalized Method of Moments (GMM) technique. Three measures of capital inflow variables are taken, i.e., remittances, foreign direct investment (FDI) and foreign debt. The findings reveal that capital inflows increase fiscal deficit in the country. The findings show that 1% increase in remittances will increase fiscal deficit by 0.312%, while 1% increase in FDI will deteriorate budget deficit by 0.250%. Similarly, 1% increase in foreign debt will worsen fiscal balance by 0.073%. Remittances and FDI have more effect on fiscal deficit compared to foreign debt. It implies that both remittances and foreign debt deteriorate fiscal balance in the country more than foreign debt. The study suggests that remittances, FDI and foreign debt should be used for productive purposes as they will help in improving fiscal balance in the country.

With the advent of an aging society all over the world, there has been a growing policy interest in the pension system that can guarantee old-age income at some level. Many countries also encourage people to join public pensions as well as private pensions. As a result, there has been a phenomenon of substituting private pensions. This study investigates the effects of various socio-economic factors on tax benefits for private pensions at the country level. The results of this study show that lower total income replacement rate of public pension and private pension assets leads to increasing tax expenditures on private pensions. And also, higher individual tax burden and governmental social welfare expenditure causes to increase tax expenditures on private pensions. Despite differences in the type of old-age income security systems by country, it is recognized that attempts to resolve the public pensions crisis caused by socio-economic changes take the form of expanding the roles of private pensions. So, this study provides politic implications that lower benefits from public pensions lead to expanded roles of private pensions supported by the government.

This paper uses the bootstrap rolling window approach to analyze the dynamic causal relationship between the fiscal deficit and the trade deficit in the US from 1901 to 2018. We find the origination and termination of each causality period by considering the structural breaks. The results show that the fiscal deficit had a positive impact on the trade deficit from 1946 to 1956, from 1982 to 1998, in 2000 and from 2002 to 2008, which is in accord with the results of the Mundell–Fleming model, while it had a negative impact from 1937 to 1945. The trade deficit had a positive impact on the fiscal deficit from 1940 to 1942, from 1959 to 1975 and from 1981 to 1994, mainly due to the World War II, oil crisis and trade friction with Japan. It means that the fiscal policy of American federal government can affect the external imbalance.

This research highlights the special problems facing the corporate governance of financial intermediaries and combines this theoretical perspective with bank observations in order to offer policy recommendations for their industry. The standard agency theory defines the corporate governance problem in terms of how equity and debt holders influence managers to act in the best interests of those providers of capital to firms. The results show that the relationship between directors’ collateralized shares, loan concentration and a bank’s non-performing loans has a significant positive, indicating that bad corporate governance and loan concentration are important warning signs for banks.

Despite the enormous growth in Islamic banking, most studies, using DEA/Stochastic Frontier Analysis, find Islamic banks are either equally or less productive than conventional banks. We apply the Olley–Pakes (OP) and Ackerberg–Caves–Frazer (ACF) approaches for estimating the production functions of conventional, Islamic and mixed banks in Bahrain and Malaysia between 1990 and 2011. The ACF results are the most plausible. Though Islamic banks tend to be less efficient than conventional banks the difference is not statistically significant. In Malaysia, mixed banks are significantly more productive than other banks and tend to have faster productivity growth.

This study examines the drivers of environmental degradation in ASEAN + China. It focusses on three unresolved questions: (i) Does the inclusion of China in ASEAN panel aggravate environmental degradation, given that China is a high carbon emissions country? (ii) Does financial development moderate the impact of energy consumption on environmental degradation in ASEAN? (iii) Does urbanization moderate the impact of energy consumption on environmental degradation in ASEAN? It employs empirical strategies that account for heterogeneity, endogeneity and cross-sectional dependence. The results show that economic growth, energy consumption and non-renewable energy aggravate environmental degradation, whereas renewable energy, foreign direct investment and trade openness mitigate it. The inclusion of China in ASEAN panel weakens the EKC hypothesis. Financial development favorably moderates the effect of energy consumption on environmental degradation in ASEAN, but adversely moderates the effect in ASEAN + China. Urbanization adversely moderates the impact of energy consumption on environmental degradation in both panels. Hence, efforts to address environmental degradation should consider these different drivers.

This paper proposes new perspective on the nexus between transportation and urbanization in China to test the search-matching theory. We find that the linkage between transportation and urbanization has both frequency and time-varying features. We find that transportation improves urbanization in the short term, while urbanization plays the importation role in transportation during the period 1969–1996. This result obviously supports search-matching theory that in the subsample periods, the transportation infrastructure exerts positive effects on urbanization in the short term but not in the long term. In the long term, urbanization will promote the development of transportation, while short-term traffic infrastructure investment can effectively improve the transfer of population to urban regions. It would be beneficial for the government to formulate the scientific traffic planning policy and adjust the transport structure to improve urbanization.

This paper constructs a DSGE model to study the relationship between the Chinese local government’s land policy, social welfare and economic fluctuations. I find that increasing the supply of residential land by the local government will reduce housing price and increase social welfare, but it crowds out the amount of industrial land and decreases final output and social welfare as well. This trade-off brings out an optimal supply ratio of residential land, 40%, in deterministic steady-state equilibrium. Besides, the local government is able to use dynamic pro-cyclical residential land supply policy to dampen economic fluctuations in China’s macroeconomy.

As the world’s second-largest crude oil consumer, China depends on imports for approximately 60% and domestic production for approximately 40%, of its oil demand. Therefore, it is very interesting to assess the pass-through effects of both domestic and international crude oil prices to gasoline and diesel prices. After the short- and long-run investigations using the nonlinear autoregressive distributed lag (ARDL) methodology of Shin et al. [Shin, Y, BC Yu and M Greenwood-Nimmo (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework” Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, R Sickels and W Horrace (eds.), pp. 281–314. Springer.], we find overwhelming evidence supporting the asymmetric price transmission mechanism between crude oil prices and gasoline prices in both the short- and long-run. In the case of diesel prices, on the other hand, the asymmetry effects seem likely to be a long-run phenomenon.

We employ a bilateral R&D spillover model to analyze how a domestic government coordinates its intellectual property rights (IPR) and trade policies and hence affects a foreign firm’s choice between export (EX) and foreign direct investment (FDI). We find that both firms’ profits increase with IPR protection if the IPR protection level in the domestic country is loose. The domestic country can coordinate trade and IPR policies and reach a high welfare level by affecting foreign firm’s entry decisions. The profitability and desirability may decrease with the strength of IPR protection and correspond to a welfare-reducing R&D.

Whether Internet use can inspire returning migrant workers’ home entrepreneurship is of great practical significance for promoting rural revitalization. Based on the data of China Labor Dynamic Survey (CLDS) in 2016, this paper empirically studies the impact of Internet use on returning migrant workers’ home entrepreneurship. The results show that, firstly, Internet use can significantly improve the entrepreneurial probability of migrant workers returning home by 8%. The results remain significant after using the instrumental variables method for endogenous problem solving and propensity score matching, changing the sample size for robustness testing. Secondly, Internet use promotes migrant workers returning home to make entrepreneurial choices mainly through expanding informal finance and obtaining formal finance. However, the mechanism of expanding informal finance has only been effective for returning migrant workers with higher level of social trust. Thirdly, Internet use has heterogeneous impact on returning migrant workers’ home entrepreneurship, which is reflected in the fact that Internet use will more significantly promote the entrepreneurial probability of migrant workers returning home with necessity entrepreneurship motivation, close to banks, eastern and central regions and developed areas, and internet use will also significantly promote the probability of opportunity entrepreneurship among migrant workers returning home who are satisfied with their household economic situation. Therefore, it is necessary to further improve the construction of broadband infrastructure in rural areas, especially western and developing areas, set up training platforms for returning migrant workers’ home entrepreneurship, promote employment through entrepreneurship and stimulate regional economic vitality, so as to accelerate rural revitalization.

This paper analyzes the overconfident and underconfident trading behavior simultaneously in the context extended from () [Learning to be overconfident. Review of Financial Studies, 14(1), 1–27]. We find that the overconfidence level will be first decreasing, then increasing and finally decreasing as the number of the successful predictions increases when the underconfident behavior is sufficiently prominent and the expected trading volume in the future will first decrease then increase and finally decrease as the number of successes increases. Furthermore, the insider’s expected profits in the future are a monotonically increasing function of the number of successes when the number of successes is sufficiently small or large but monotonically decreasing function of this number when it is in the intermediate range. This completes the analysis of the investors’ biased behavior.