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International Monetary Fund. Monetary and Capital Markets Department
Hong Kong SAR has, over the recent years, become an equity trading hub catering to domestic and foreign investors, including increasingly to investors from Mainland China. Most trading is conducted on markets operated by recognized exchange companies, with limited domestic trading happening via automated trading services (ATS) providers in the form of alternative liquidity pools. The introduction of Stock Connect in 2014 enabled investors from Hong Kong (including domestic and foreign) to directly invest in the Shanghai and later Shenzhen markets and investors from the Mainland to directly access the Hong Kong market. Trading via Stock Connect has seen a steady rise over the last few years, increasing the linkages between Hong Kong SAR and the Mainland. Mainland companies currently account for over 60 per cent of market capitalization of the equities traded on the Stock Exchange of Hong Kong (SEHK).
Ms. Yu Shi
This paper identifies a new mechanism leading to inefficiency in capital reallocation at the extensive margin when an economy experiences a sectoral boom. I argue that imperfections in the financial market and capital barriers to entry in the booming sector create a misallocation of managerial talent. Using comprehensive firm-level data from China, I first provide evidence that more productive firms reallocate capital to the booming real estate sector, and demonstrate that the pattern is likely driven by fewer financial constraints on these firms. I then use a structural estimation to verify the talent misallocation. Finally, I calibrate a dynamic model and find that the without the misallocation, the TFP growth in the manufacturing sector would have improved by 0.5% per year.
Suprabha Baniya
This paper investigates the effect of timeliness in accessing the intermediate inputs on the trade pattern. In particular, any country that has a higher ability to transport goods on time has a comparative advantage in industries that place a higher value on the timely delivery of their inputs, and this comparative advantage pattern is stronger for processed goods than for primary goods. To do this, a measure for how intensively any industry demands for the timely delivery of its intermediate inputs is constructed combining Hummels and Schaur (2013)’s calculations of the time sensitivity of products with the input-output tables.
Elin Baldárrago and Mr. Gonzalo Salinas
While trade integration has been an engine of global growth and prosperity, as suggested by theory, some sectors have been negatively affected by increased import competition. We test if this negative effect is significant in a context of high intranational migration, as theory indicates that labor mobility could reduce it. We focus on the 2004-14 period of trade liberalization in Peru (a major beneficiary of trade integration), which allows for methodological improvements relative to similar studies. We find that districts competing with liberalized imports experienced significantly lower growth in consumption per capita despite some emigration in response to increased import competition. This underscores the need to support the “losers of trade liberalization” even amidst high labor mobility.
International Monetary Fund
This study relates Australian household saving more closely to movements in asset market using event study analysis and econometric analysis. In this study, the policy challenges for Australia from rebalancing in China, a temporary growth slowdown in China, and a recession in advanced countries are analyzed. The Globally Integrated Monetary and Fiscal Model (GIMF) is used for policy challenges. The impact of the mining boom on the Australian labor market is also discussed in this paper.
Mr. Shengzu Wang and Ms. Patrizia Tumbarello
This paper analyzes the factors driving house prices in Australia from a cross-country perspective using several approaches. It uses a cointegration technique to estimate the long-run equilibrium house prices in Australia, New Zealand, and Canada and assesses the extent of a possible disequilibrium. It also presents an event analysis to shed some light on the link between house prices, capital inflows and the terms of trade. The econometric analysis suggests an overvaluation of 5-10 percent depending on the model specification. Event analysis indicates that terms of trade shocks were associated with larger increases in house prices in Australia, than in the case of strong capital inflow episodes.
Petia Topalova
This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile, at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors.
Ms. Prachi Mishra, Rodney D. Ludema, and Anna Maria Mayda
This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.
International Monetary Fund. External Relations Dept.
The September 2007 issue of F&D looks at the growth of cities and the trend toward urbanization. Within the next year, for the first time in history, more than 50 percent of the world's population will be living in urban rather than rural areas. What are the economic implications of this urban revolution? Economists generally agree that urbanization, if handled well, holds great promise for higher growth and a better quality of life. But as the lead article tells us, the flip side is also true: if handled poorly, urbanization could not only impede development but also give rise to slums. Other articles in this series look at poverty as an urban phenomenon in the developing world and the development of megacities and what this means for governance, funding, and the provision of services. Another group of articles discusses the challenge of rebalancing growth in China. 'People in Economics' profiles Harvard economist Robert Barro; 'Country Focus' looks at the challenges facing Mexico, and 'Back to Basics' takes a look at real exchange rates.