Michael Murach participated in the 10th International Network for Economic Research (INFER) Annual Conference at the University of Bordeaux from June 7-9, 2017. He presented his joint paper together with Professor Wagner on “The Effects of External Shocks on the Business Cycle in China – A Structural Change Perspective”. The paper was presented in a special session on “Emerging Countries Vulnerabilities and Risks”.
If you would like to receive more information about the first CEAMeS Workshop at the Fernuniversität in Hagen, you can find a short abstract of every speech that was given during the workshop in the section below.
Key Note Speech “China Quo Vadis: Update, Reforms, Outlook”
Dr. Markus Rodlauer (Deputy Director of the Asia and Pacific Department (APD)at International Monetary Fund)
Dr. Rodlauer began his speech by showing that the cyclical near-term momentum in the Chinese economy may be strong and that there is some progress in rebalancing, however, he argued that the medium-term outlook is worrisome in International Monetary Fund’s view. As a main reason for this problematic outlook he mentioned the rising debt and at the same time falling returns on investment. Finally he offered some policy advice including lower but qualitatively better economic growth, less investment and less credit growth, more consumption, more social spending and an increase in the household income. Furthermore he recommended fiscal and financial reforms and reforms on China’s state-owned-enterprises toensure that China can continue its successful history of growth over the past decades.
“Declining Japanese Yen and Inertia of the US Dollar”
Prof. Dr. Eiji Ogawa (Hitotsubashi University; Tokyo)
In his speech Prof. Dr. Ogawa focused on the effects of the introduction of the Euro in 1999 and the global financial crisis on several currencies, namely the US Dollar, the Japanese Yen, the British Pound Sterling and the Swiss Franc. Using a money-in-utility-model as a theoretical framework,Prof. Ogawa estimated the expected inflation rates for the single currencies in different sub-sections and subsequently calculated a contribution of each currency to utility. In the last step he compared the mean values of this utility-rate among the sub-sample periods to find out whether the contribution of the single currency to utility changed significantly.
The main findings are as follows: First, the contribution of the Japanese Yen and Swiss Franc to utility decreased notably while the contribution of the Euro and British Pound Sterling to utility increased significantly after the Euro was introduced. Second, after the global financial crisis the contribution of the Japanese Yen to utility decreased further. Third, taking the effects of the global financial crisis into account the contribution of the US Dollar to utility has not changed before and after the introduction of the Euro, which proves that the US Dollar remained a global key currency in the international monetary system.
“Restructuring and Reshaping of Efficiency Mode for the Chinese Economy”
Prof. Dr. Ping Zhang (The Chinese Academy of Social Science (CASS), Beijing)
Prof. Dr. Zhang divided his speech into three main parts. First he talked about the Chinese shift from a high-speed-growing economy to a medium-to-high-speed-growing one, and presented some statistics on the structural rebalancing process taking place in China. In the second section he described the challenges that the Chinese economy will face during the process of moving forward towards a high-quality economy. The final part of the speech covered possible reforms to handle the challenges of a middle-income economy – in particular avoiding the middle-income trap.
“Important Competition and Workplace Injuries in U.S. Manufacturing Industries”
Prof. Dr. Tat-kei Lai (IÉSEG School of Management, Paris)
Did Chinese imports make U.S. manufacturing workplaces safer or more dangerous? That is the question that took the center stage in the speech of Prof. Dr. Lai. In the main analysis he used the Establishment Specific Injury and Illness Data (OSHA Data Initiative) for an industry-level regression and a regional-level regression. The main finding is that Chinese imports indeed can help to reduce the injury and illness rates of U.S. manufacturing industries. This effect seems to work through a reduction in the employment in more dangerous occupations.
“Effects of Education on Economic Growth”
Prof. Dr. Yu Liu (Center of Macroeconomic Research, Xiamen)
The speech by Prof. Dr. Liu covered the effects of different levels of human capital on economic growth of China. He divided human capital into three levels, namely primary human capital, secondary human capital and advanced human capital. It is assumed that primary education contributes mainly to the final output production and secondary education to imitation. Advanced education is the driving force for technological innovations. With the help of a fixed effects regression model, Dr. Liu obtained the following results: primary education contributes to final output. On the contrary, there is no statistical significant proof that an advanced education contributes effectively to technological innovations. Finally, Prof. Dr. Liu derived some policy advice from his findings. Most importantly, China should adjust the professional structure of higher education and stop expanding its universities too quickly.
“A Stylized Model of China’s Growth Since 1978”
Linda Glawe (FernUniversität in Hagen)
Since China has reached the middle-income range, there is an increasing body of literature discussing the possibility that China will enter a middle-income-trap in the near future. Ms. Glawe contributed to this discussion by presenting a neoclassical multi-sector growth model of the Chinese economy. Reflecting the neoclassical view, the model explains China’s growth process since 1978 as a sequence of transitory growth phases generated by the Deng Xiaoping reforms. Ms. Glawe’s model imaged this situation, especially the transitory character of China’s past growth, very well. She also found that China’s growth rate may further slow down unless other growth sources are activated. Furthermore, the model predicts that the service sector will become by far the largest sector in Chinese economy, and thus, future factor productivity will depend on the productivity in the service sector.
Policy Speech: “Lessons from China for Emerging Markets”
Dr. Iikka Korhonen (Head of the Bank of Finland Institute for Economies in Transition (BOFIT), Helsinki)
Dr. Korhonen first named three main lessons that emerging economies can learn from China:
1. Reforms work, if an economy is ready to experiment.
2. Small reforms can have big effects on the economy, if the respective country is very poor and/or its prevailing system is dysfunctional.
3. Trying to maintain excessively high growth, if the country is already relatively wealthy can lead to large imbalances.
But what stands out most from the speech of Dr. Korhonen was the recommendation not to commit to rigid numerical growth targets. An enormous level of debt or massive overcapacity in some sectors as a direct consequence of a chase after a certain growth-rate target can cause large distortions within the economy.
“The Effects of External Shocks on the Business Cycle in China: A Structural Change Perspective”
Michael Murach (FernUniversität in Hagen)
Mr. Murach contributed with his speech to the wide topic of China’s development from a low-income to a high-income economy. Since China has reached a new stage in its process of structural-change (namely the de-industrialization or “tertiarization”) the service sector recently surpassed the industrial sector, which causes new challenges for the country. Mr. Murach presented the results of his studies on the stability perspective in China and the resilience of the Chinese economy to different types of shocks in different sectors. He used a VAR analysis and examined different transmission channels such as the financial channel of business cycle transmission or the trade channel of business cycle transmission. Further he presented evidence for the existence of a confidence channel. In his conclusions he highlighted that the industrial sector seems to be most sensitive to external shocks and that the ongoing process of structural change can be a chance for China to become less sensitive to such shocks.
“Identity or Skill? Examination of City Size Wage Premium Differential in Chinese Cities”
Assistant Prof. Dr. Jing Li (Prof. Dr. Yu Liu (Center of Macroeconomic Research, Xiamen))
By using the surveys of Chinese Household Income Project (from 2002 and 2013) Prof. Dr. Li investigated how China’s fast urbanization affects the income of the city´s residents. In this empirical analysis she used an OLS-regression to verify whether a city size wage premium exists. Moreover, the method of propensity score matching (PSMatch) was used to gauge the city size premium wage. The results of this analysis can be summarized as follows: Firstly, urbanization leads to higher wages for all inhabitants of China’s cities. Secondly, city size wage premium differs in different groups (migrant or not, high vs. low skilled worker). Lastly, to the residents living in the city the primary factor that determines their city size wage premium is skill. Conclusively Prof. Dr. Li gave some policy suggestions based on the above mentioned findings.
“Exchange Rate Pass-Through: What has Changed Since the Crisis?”
Dr. Richhild Moessner (Bank of International Settlements (BIS), Basel)
In her speech, Dr. Moessner discussed the question of how the pass-through to consumer prices evolved for advanced and emerging economies. She used a dynamic panel regression with non-linearities and the generalized method of moments (GMM) estimation to address endogeneity problems. Overall the two main takeaways are that the exchange rate pass-through to consumer prices has been low and stable for advanced economies, and higher but declining after the crisis in emerging markets. The declining pass-through in the emerging markets economies is linked to declining inflation. According to the cost menu theory, a possible explanation is that when inflation is higher exchange rate changes are passed through more quickly and to a larger extent because firms adjust their prices frequently anyway.
“China’s State Energy Investment”
Dr. Hong Bo (SOAS University, London)
In her speech Dr. Bo examined China’s state energy investment during the period from 1991 to 2007. She used a provincial-level panel dataset and a generalized method of moments (GMM) estimation as well as theories of exhaustible resources – especially the Hotelling-Rule. Furthermore she described that the Chinese energy sector is representative for China’s model of state capitalism and that investment decisions contains economic motives as well as social and political ones. In the end the most important findings were presented. Most importantly China’s state energy investment is demand driven. It is also mostly unrelated to energy efficiency in economic terms and predominately done with the consideration of reducing negative externalities associated with investment in energy production. She found some weak evidence suggesting a substitution effect between state energy investment and imports from the international oil market.
“Governments Efficiency and Exports in China”
Antonia Reinecke (FernUniversität in Hagen)
Do Chinese firms export more if they are located in a province associated with higher governmental efficiency? This question was dealt with in the speech that was given by Ms. Reinecke in the final presentation of the first annual CEAMeS workshop. Furthermore Ms. Reinecke examined whether firm-size matters in this regard. By using a panel regression with different types of fixed effects she analyzed a dataset that covers 31 Chinese provinces in the period from 2001 to 2006. The main findings are that a positive correlation between provincial government efficiency and Chinese firm’s exports exists, however, this effect does not occur until the firms reach a certain size. She also argued that the export volume is positively affected by the firm size and that this size effect is in turn reinforced by government efficiency. In the last sections of her speech Ms. Reinecke referred to the problem of endogeneity inside her work and suggested further investigations.
The first CEAMeS Workshop on „Macroeconomic Development and Trade in East Asia” took place from May 11th until the 13th at the FernUniversität in Hagen, Germany. After the welcoming-words of Prof. Dr. Ada Pellert, the rector of the FernUniversität in Hagen, and Prof. Dr. Helmut Wagner, head of the CEAMeS Center at the FernUniversität in Hagen, a series of speeches focusing on the macroeconomic development in East Asia (mostly China) were given. Alongside the presentations of three researchers from the hosting FernUniversität in Hagen, international guests from five different countries presented the results of their recent research activities
Intensive conversations and discussions took the center stage of this first meeting in Hagen, whose intention was that the different research fellows of the “Center for East Asia Macro-economic studies” got to know each other personally. “The two-day workshop was received very well by the audience and especially our guests from China were enthusiastic about future collaborations with our center!”, as Prof. Wagner summarized the weekend at the campus.
One highlight of the conference was the keynote-speech given by Dr. Markus Rodlauer, deputy director at the International Monetary Fund, who was on his way to an international summit about the Belt and Road Initiative in Beijing. He discussed China’s current economic situation and presented an outlook for the nearby future (for more information click here).
A vital part of the meeting was the delegation of the “Center for Macroeconomic Research” from the Xiamen University in China. At the end of the workshop the head of this delegation, Prof. Wenpu Li, praised the great organization and announced that the second workshop is planned to be held in China, in spring 2018. At this point the event should be opened for further researchers from China and Japan. “I think this invitation shows the close relation we have to our research fellows in China and is a sign for the high regards we received during our workshop.” Prof. Schmerer, who founded CEAMeS together with Prof. Wagner, added: “This will be a great opportunity for us to sharpen our international reputation.”
You can find a short abstract of each speech that was given during the workshop by clicking here.
The link below refers to the article that is depicted above:
Professor Wagner has been invited by the Graduate School of Economics at Kobe University (Japan) to give a presentation of his current research.
Professor Wagner and Linda Glawe will (on invitation) attend the Asian Development Bank Institute (ADBI)-Chinese Academy of Social Sciences (CASS)-workshop on “Middle-Income Trap in Asia” in Kobe (Japan) on 12-13 December. They have been invited to present their joint paper “China in the Middle-Income Trap?”. This paper will come out as an ADBI Working Paper and subsequently in an ADBI book volume in 2017.
Professor Wagner has been invited to present his paper “The Building Up of New Imbalances in China: The Dilemma with ‘Rebalancing’” at the international conference ”One Belt and One Road – China and the World” organized by Konfuzius-Institut Frankfurt on November 18-19, 2016.
Prof. Schmerer has attended (on invitation) the conference “China and the Deglobalising World Economy” at the Nottingham University in Ningbo (China) from 4th -5th November 2016 and later presented at the SUFE (The School of Economics of SUFE) workshop on 11th November 2016.
GEP conference Ningbo:
Professor Wagner gave an interview concerning the discussion on the topic of “Made in China 2025” to the Wall Street Journal.
He was interviewed by the former Wall Street editor Catherine Bolgar. The interview called “Made in China 2025” has been published in October in the Wall Street Journal and can as well be found at Dassault’s blog, see the link:
Professor Wagner has (on invitation) visited the International Monetary Fund (IMF) in Washington, DC, and resided for one week as a guest of the Asia and Pacific Department in October 2016.
We are pleased to announce that this month Dr. Donghyun Park from the Asian Development Bank visited the Center for East Asia Macro-economic Studies (CEAMeS) at the University of Hagen in October 2016. He holds a PhD in economics from the University of California, Los Angeles, and his main research fields are international finance, international trade, and development economics. His research, which has been published extensively in journals and books, revolves around policy-oriented topics relevant for Asia’s long-term development, including the middle-income trap, service sector development, as well as financial sector development. Dr. Park plays a leading role in the production of Asian Development Outlook, ADB’s flagship annual publication. The topic of Dr. Park’s presentation was “Asia´s Economic Outlook and Global Impact of China´s Slowdown”.
The presentation took place on 24 October 2016 at 11:00 a.m. at the University of Hagen, KSW Building, Second Floor, Room 4+5.
Our new Research Center CEAMeS has been founded by the end of April and is being funded since September 2016.
We have established a CEAMeS Discussion Paper Series in which all our Research Associates/Fellows are invited to publish their new work. We have already published four Discussion Papers since May. (see Publications).
We plan to organize regular CEAMeS workshops. The first one is scheduled for May 2017. Further information will be available on the CEAMeS website soon.
We will gather and provide information on a continuous basis about new publications and upcoming conferences / workshops on East Asia on our CEAMeS website.