“Border Effects without Borders: What Divides Japan’s Internal Trade?”

“Border Effects without Borders: What Divides Japan’s Internal Trade?”

Jens Wrona

In: International Economic Review, Volume 59 (August 2018), Issue 3, Pages 1209-1262

This article identifies a “border” effect in the absence of a border. The finding that trade between east and west Japan is 23.1% to 51.3% lower than trade within both country parts is established despite the absence of an obvious east–west division due to historical borders, cultural differences, or past civil wars.

“The chinese saving rate: Long-term care risks, family insurance, and demographics”

“The chinese saving rate: Long-term care risks, family insurance, and demographics”

Ayşe İmrohoroğlu and Kai Zhao

In: Journal of Monetary Economics, Vol 96, June 2018, Pages 33-52

A general equilibrium model that properly captures the risks in old age, the role of family insurance, changes in demographics, and the productivity growth rate is capable of generating changes in the national saving rate in China that mimic the data well.

“Tariff scares: Trade policy uncertainty and foreign market entry by Chinese firms”

“Tariff scares: Trade policy uncertainty and foreign market entry by Chinese firms”

Meredith Crowley, Ning Meng and Huasheng Song

In: Journal of International Economics, Vol. 114, September 2018, Pages 96-115

Crowley et al. estimate how a rise in uncertainty about future tariff rates impacts firm decisions to enter into and exit from export markets. Using Chinese customs transactions between 2000 and 2009, they exploit time-variation in product-level trade policy and find that Chinese firms are less likely to enter new foreign markets and more likely to exit from established foreign markets when their products are subject to increased trade policy uncertainty.

“To guide or not to guide? Quantitative monetary policy tools and macroeconomic dynamics in China”

“To guide or not to guide? Quantitative monetary policy tools and macroeconomic dynamics in China”

Hongyi Chen, Michael Funke, Ivan Lozev and Andrew Tsang

BOFIT Discussion Papers 3/2017

This paper discusses the macroeconomic effects of China’s informal banking regulatory tool “win-dow guidance,” introduced in 1998. Using an open-economy DSGE model that includes the com-mercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy tool and the implications of quantity-based vs. price-based monetary policy instruments for welfare. The analyses are relevant to the current overhaul of Chinese monetary policy.

“Financial frictions and foreign direct investment: Evidence from Japanese microdata”

“Financial frictions and foreign direct investment: Evidence from Japanese microdata”

Horst Raff, Michael Ryan and Frank Stähler

In: Journal of International Economics, Vol. 112, pp 109 – 122

Using Japanese microdata for the period 1980 to 2000 Raff et al. find evidence for two transmission channels from financial shocks to foreign direct investment: a collateral channel, whereby changes in the value of investors’ landholdings affect their borrowing ability; and a lending channel, whereby changes in bank health affect banks’ lending ability.

“Government Credit, a Double‐Edged Sword: Evidence from the China Development Bank”

“Government Credit, a Double‐Edged Sword: Evidence from the China Development Bank”

Hong Ru

In: The Journal of Finance, Vol. 73, No. 1, pp 275 – 316

Using proprietary data from the China Development Bank (CDB), this paper examines the effects of government credit on firm activities. Tracing the effects of government credit across different levels of the supply chain, Ru finds that CDB industrial loans to state‐owned enterprises (SOEs) crowd out private firms in the same industry, but crowd in private firms in downstream industries.

“The effects of ownership change on bank performance and risk exposure: Evidence from indonesia”

“The effects of ownership change on bank performance and risk exposure: Evidence from Indonesia”

Mohamed Shaban and Gregory A. James

In: Journal of Banking & Finance, Vol. 88, pp 483 – 497

Shaban and James investigate the effects of an ownership change on the performance and exposure to risk of 60 Indonesian commercial banks over the period 2005-2012. They can show, that state-owned banks tend to be less profitable and more exposed to risk than private and/or foreign banks.

“Credit and Fiscal Multipliers in China”

“Credit and Fiscal Multipliers in China”

Sophia Chen, Lev Ratnovski and Pi-Han Tsai

IMF Working Paper WP/17/273

Chen et al. estimate credit and fiscal multipliers in China. They use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. The results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.

“Risks in China’s Financial System”

“Risks in China’s Financial System”

Zheng Michael Song and Wei Xiong

NBER Working Paper No. 24230

Since 2008 the Chinese debt-to-GDP ratio skyrockets. This fact, and the high leverage as well as the soaring housing prices, have caused wide concerns about the risks and instability of China’s financial system. Motivated by these concerns Song and Xiong reviewed several commonly perceived financial risks in their article and discuss the roots in China’s unique economic and financial system.

“Value-added exports and U.S. local labor markets: Does China really matter?”

“Value-added exports and U.S. local labor markets: Does China really matter?”

Leilei Shen and Peri Silva

In: European Economic Review, Vol. 101, January 2018, Pages 479-504

In this paper, the main focus is the direct contribution of the Chinese economy to changes in U.S. labor market outcomes. Their strategy follows the insights provided by a model of international trade with G regions, where N of these regions represent commuting zones in the U.S. economy, and where firms in a particular sector and country are assumed to have access to the same technology displaying increasing returns to scale.

“Unified China and Divided Europe”

“Unified China and Divided Europe”

Chiu Yu Ko, Mark Koyama and Tuan-Hwee Sng

In: International Economic Review, January 2018, Vol. 59, No. 1, forthcoming

Throughout much of history,the most economically developed region of the world wasn’t Europe but China, which was typically a unified empire. This paper proposes a unified framework based on Eurasian geography to (a) help explain the different political equilibria in China and Europe, and (b) explore the economic consequences of political centralization and fragmentation.

“Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China”

“Post-disaster aid and development of the manufacturing sector: Lessons from a natural experiment in China”

Erwin Bult, Lih Xu and Xiaobo Zhang

In: European Economic Review, Vol. 101, January 2018, Pages 441-458

Bult et al. adopt a disaggregate approach to study the link between aid and Dutch Disease dynamics, using a natural experiment in China. Specifically, they examine whether post- disaster aid provided to a subsample of Chinese counties, devastated by an earthquake in 2008, affects the sectoral composition of local economies. Using different methods, they consistently find that counties receiving (more) aid —even “nearby counties” not directly damaged by the earthquake —tend to suffer from a contraction of the manufacturing sector.

“Population policies, demographic structural changes, and the Chinese household saving puzzle”

“Population policies, demographic structural changes, and the Chinese household saving puzzle”

Suqin Ge, Dennis Tao Yang, Junsen Zhang

In: European Economic Review, Vol. 101, January 2018, Pages 181 – 209

Household saving rates have increased dramatically over the past two decades in China, in addition to the rise in average saving rate; the age-saving profile has also evolved into an unusual pattern. In this paper, Ge et al. propose and test a new hypothesis that demographic structural changes caused by a series of population control policies since the 1970s have contributed to changes in China’s household saving patterns. Therefor they develop a simple overlapping generation (OLG) model to illustrate the effects of population control policies and demographic structural changes on saving decisions of individuals at different life stages.

“Credit ratings of domestic and global agencies: What drives the differences in China and how are they priced?”

“Credit ratings of domestic and global agencies: What drives the differences in China and how are they priced?”

Xianfeng Jiang and Frank Packer

BIS Working Papers No. 648

In contrast to the the domestic rating agencies the top global agencies, headquartered outside of China, rate bonds, that are issued overseas by Chinese corporations, usually with much lower grades. In this paper, Jiang and Packer examine the risk assessments of Chinese (non-financial) companies published by the major Chinese rating agencies and the two largest global rating agencies. Further, they investigate the degree to which rating scales are comparable between domestic rating agencies, as well as between domestic and global rating agencies.