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Publications

Forthcoming publications in refereed journals

Alphabetical Order

Abstract

In this paper, we assess the effect of institutional similarity on foreign direct investment. In a large panel of bilateral FDI stocks that covers roughly 190 countries both as host and source countries of FDI, we demonstrate that it is not similar in general, but similar with respect to government involvement in markets and with respect to corruption that matters. Our finding is robust to a large set of different panel estimators and specifications of the gravity model that is underlying our estimation.

Publications in refereed journals in 2024

Alphabetical Order

Abstract

Optimal monetary policy, under flexible and sticky prices, and sticky nominal wages are studied in the canonical matching model of the labor market with a working capital channel. A money demand by firms is motivated by the fact that a significant amount of M1 is held by firms. As a result of the working capital, the Ramsey-optimal monetary policy calls for inflation when employment is above the socially efficient level and for deflation when it is below that level. This result holds under flexible wages as well as nominal wage rigidities. In other words, to improve labor market efficiency, deflation is necessary to “grease the wheels of the labor market.” Although there is no relationship between optimal monetary policy and the market tightness under flexible prices, a long-run and mainly negative relationship between the optimal inflation rate and the equilibrium tightness emerges under sticky prices.

Publications in refereed journals in 2023

Alphabetical Order

Abstract

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.

Publications in refereed journals in 2022

Alphabetical Order

Abstract

Each person’s characteristics may influence that person’s behaviors and outcomes. This study builds and uses a new database to estimate experts’ performance and boldness based on their experience and characteristics. Our study classifies experts providing inflation forecasts based on their education, experience, gender, and environment. We provide alternative interpretations of factors affecting experts’ inflation forecasting performance, boldness, and pessimism by linking behavioral economics, the economics of education, and forecasting literature. The study finds that an expert with previous experience at a central bank appears to have a lower propensity for predicting deflation.

Publications in refereed journals in 2021

Alphabetical Order

Abstract

This paper examines asymmetry of the loss function of professional forecasters for output growth, inflation, and exchange rate forecasts, based on the survey of professional forecasts (SPF) data of three South Asian countries (India, Indonesia, and Singapore). Our results provide India’s unbiased output growth forecasts and under-predicted inflation and exchange rate forecasts; Indonesia’s broadly unbiased forecasts; and Singapore’s under-predicted output growth forecasts and unbiased inflation and exchange rate forecasts. Testing the rationality of all three countries’ SPF forecasts, we find that all are rational under an asymmetric loss function but not under a symmetric loss function.

Publications in refereed journals in 2020

Alphabetical Order

Abstract

Governments, central banks, and private companies make extensive use of expert and market-based forecasts in their decision-making processes. These forecasts can be affected by terrorism, a factor that should be considered by decision-makers. We focus on terrorism as a mostly endogenously driven form of political uncertainty and assess the forecasting performance of market-based and professional inflation and exchange rate forecasts in Israel. We show that expert forecasts are better than market-based forecasts, particularly during periods of terrorism. However, the performance of both market-based and expert forecasts is significantly worse during such periods. Thus, policymakers should be particularly attentive to terrorism when considering inflation and exchange rate forecasts.

Publications in refereed journals in 2019

Alphabetical Order

Abstract

Research on the natural resource curse has been extended to the impact of natural resource abundance/dependence on institutional or governance quality, which includes corruption. This study investigates the impact of coal mining on local corruption in China. The findings show a positive association between coal output and corruption at the prefectural Party Secretary's level. Using the spatial band of 200 km radius and 100 km radius of individual coalmines aggregated at prefecture level as an instrumental variable, we establish the causality running from coal output to local corruption. A robustness check using court verdicts of all bribery cases in China indicate the same result, i.e., coal mining is conducive to local corruption at all levels. Furthermore, we show that the mechanism is not through demand side, i.e., corruption is not a consequence of economic boom around the coalmines but directly linked to the coal mining itself.

Publications in refereed journals in 2018

Alphabetical Order

Abstract

We evaluate the directional accuracy of inflation forecasts based on the survey data of urban savings account holders in China. By using a new market-timing test, we show that the urban consumers' expectations of inflation are not as useful predictor of the overall consumer price index (CPI) and the urban household CPI (U-CPI) in China. However, after our in-depth analysis using the inflation rate of each cagtegory in the U-CPI basket, we find that the consumers' forecasts are useful in predicting the movement of the residence component in the U-CPI basket since the third quarter of 2009.

Publications in refereed journals in 2017

Alphabetical Order

Abstract

This study examines how household financial risk tolerance is affected during the period of 2007 and 2009, which covered the eve and through of the financial crisis in the United States and what types of households are associated with the change of risk tolerance. Risk tolerance is measured bz two objective indicators, narrowlz and broadlz defined stock ownership, and a subjective indicator, risk taking attitude. Using panel data from 2007 to 2009 Survez of Consumer Finances, results show that during the financial crisis, the households in general are more risk averse, indicated by withdrawing from stock markets and holding a less risk taking attitude. In addition, Black and Hispanic households are more likely and households with higher education are less likely to withdraw from stock markets. Older households are less likely to change in risk tolerance during the financial crisis, as are richer households. The findings show panel data could generate novel results and contribute to the literature of financial risk tolerance.

Publications in refereed journals in 2016

Alphabetical Order

Abstract

In this paper, we show that the "Merger Paradox" (Salant, Switzer and Reynolds, 1983) is mitigated when capacity constraint is considered. This is because outside firms who do not participate in a merger cannot expand their output beyond their existing capacity, and therefore, Stigler type of free riding is alleviated. When overcapacity is socially costly, it is also shown that a pro-merger fiscal policy may discourage ex ante capacity investment and hence alleviate overcapacity, if capacity building is not too costly. Furthermore, it can be shown that the optimal pro-merger subsidy is always welfare improving when it discourages capacity building.