Publications

State-owned Enterprises and Entrusted Lending: Economic Growth and Business cycles in China Economic Inquiry

Optimal central banking policies: Envisioning the post-digital yuan economy with loan prime rate-setting (With King Yoong Limand Chunping Liu) Emerging Markets Review

Informal economy and Central bank digital currency (With Eun Young Oh) Economic Inquiry

Wiley Research Headline September/2022 -- Topical Evidence Article

Mitigating economic volatility: When building efficient financial markets should supersede conventional economic policy (with M. Emranul Haque and Paul Middleditch) at Journal of Government and Economics

Recession and Recovery from the Pandemic (With Lester Hunt and Anqi Zhang) at Research in Globalization

Optimal fiscal management in an economy with resource revenue-financed government-linked companies  (With King Yoong Lim) at International Journal of Finance and Economics

Working Papers

On the Macroeconomic Effects of Shadow Banking Development  (With Georgios Magkonis and Eun Young Oh) 

abstract: We build and estimate a dynamic stochastic general equilibrium model with risky innovation and shadow credits to study the macroeconomic implications of shadow banking (SB), particularly on pro- ductivity. Our analysis is motivated by negative relationships between SB development and innovation outcome or total factor productivity (TFP) growth. In our model, information asymmetry associated with technology utilization leads to an agency problem in which shadow intermediation reduces banks’ incentives to screen project quality. An SB boom crowd-out traditional financial services, decreases inno- vation quality and technology efficiency, and thereby reduces TFP. In the light of model mechanisms, we analyse cross-country differences and deliver important implications of SB. SB development mainly driven by financial factors (e.g., the US case) leads to significant loss on TFP while that relatively prompted by real-sided factors (e.g., China and the EA cases), could be less harmful.

Uncertainty Shocks in An Intangible Economy

abstract: This paper employs a micro-to-macro approach to study uncertainty shocks in the context of an intangible or knowledge-based economy. Based on quarterly firm level data, I find that intangible capital acts as a cushion to mitigate the adverse effects of uncertainty shocks on investment and stock prices. The study further develops a two-sector dynamic stochastic general equilibrium (DSGE) model, providing insights into the shifts in investment composition in uncertainty-driven business cycles. Notably, the ascent of intangibles not only expands the economic scale but also diminishes aggregate volatility in uncertainty-driven business cycles. In essence, the economy becomes more knowledge-intensive in the wake of heightened uncertainty, indicating a dynamic interplay between intangibles and macroeconomic dynamics.

The Dynamics of Monetary Policy Regimes in China Under Global Uncertainty: A Time-Varying Approach (With Georgios Magkonis, and Eun Young Oh) 

abstract: This study examines the evolution of China’s monetary policy regimes and its economy in response to global uncertainty, using a time-varying parameter vector autoregression model with stochastic volatility. Analyzing a monthly dataset with a novel measure of monetary policies from 2002 to 2020, we contribute to understanding the impact of global uncertainty shocks amidst policy and structural changes in China. Our findings reveal reduced reactivity and sensitivity of the economy and monetary policy to uncertainty in the 2010s, indicating the Chinese economy’s increased resilience under the new normal policy regime. Negative monetary policy relationships with the overshooting of output or inflation are found, with a stronger association observed in the context of inflation overshooting. This highlights China’s attention to forward-looking inflation in policy adjustments.

Re-examining the international spillovers: an Asian perspective (With Georgios Magkonis and Simon Rudkin)

abstract: This study investigates the transmission and the business cycle implications of Chinese export shocks to other Asian economies. Based on a panel vector autoregression (PVAR) model, we provide evidence that a positive export shock originating from China simultaneously stimulate aggregate demands for both China and other Asian economies. The PVAR model takes into account three main sources of potential interactions among ten Asian economies. Simulations from a two-country DSGE model featuring endogenous trade links suggest that positive trade spillover is essential to explain the macroeconomic comovement pattern. Our findings further indicate the importance of the Chinese economy to business cycle synchronisation.

Work in Progress