We measure the natural rate of interest of Hong Kong in a flexible VAR model. We find that the natural rate of interest of Hong Kong fell below zero after the SARS shock in 2003 and reached the lowest after the great recession in 2007-2009. Variance decomposition shows that mainland China, instead of the US, has a larger impact on the natural rate of interest of Hong Kong.

This paper investigates the effects of environmental jurisdiction on energy efficiencies by exploring the quasi-natural experiment of China's establishment of environmental courts. The results of the staggered DID method show the following: (1) compared with the control group, the establishment of environmental courts results in a significant reduction of about 0.8% in local energy intensity, which is the ratio of energy consumption to GDP, and (2) three channels explain the effects, namely, improving the trial efficiency of energy cases, stimulating local bureaucrats' performance of enforcing environment and energy policies, and promoting innovations of energy-saving technologies. The results of Goodman-Bacon decompositions and a set of robust event study show that the staggered DID method is robust.

We study the impact of demographic change on the natural interest rate of China. We analyze the effect of aging population by constructing an overlapping generations model, which embeds demographics, technology and public debt to facilitate simulating China’s natural interest rate and its counterfactuals. We find that China’s natural interest rate has been declining slowly ever since 2000 and the main driver of this downward trend is the declining mortality rate. In the next two decades, due to increasing young labor, China’s natural interest rate will have a flat period of about ten years in the downward trend.

We investigate the time-varying demand elasticity of U.S. Treasury bonds in the international financial market using a TVP-VAR-SV model. We find that the demand elasticity decreases when the risk of the international financial market rises but increases when the risk of the U.S. financial market rises, though the demand elasticity is not significantly different from that during the financial crisis. Our findings suggest that the U.S. Treasury bonds have market power and convenience yields as safe assets in the international financial market, but they also face competition from other countries’ bonds.

We analytically characterize the comparative statics of the macroeconomy after income tax reductions in which production is organized in networks around the inefficient economy. We contribute to the literature by showing that in production networks, income taxes have different effects from revenue taxes which are assumed to be real distortions in the literature. The sectoral income tax reductions’ first-order effect on the GDP is given by a sufficient statistics: the product of the sectoral labor demand elasticity and sectoral Domar weight minus the sectoral labor share in the total labor supply, the latter of which is adjusted for labor supply elasticity if labor is elastic. We apply this model to quantify the effects of income tax reductions during the COVID-19 pandemic in the USA.

This paper studies the effects of world oil price uncertainty on China’s economy from both empirical and theoretical angles. First, we use a vector autoregression model with stochastic volatility in mean to explore the relation between world oil price uncertainty and real economic activity of China. We find that one standard deviation higher uncertainty shock of world oil price reduces electricity production by almost 0.2 percentage. Then we use a canonical New-Keynesian model solved by third-order perturbation method to explain this phenomenon, in which households’ precautionary saving channel distresses real activity when oil price uncertainty is higher.

We analytically characterize the comparative statics and transitory dynamics of the macroeconomy after a one-time real distortion changes by assuming supply chain adjustment costs. We analytically decompose the comparative static effects into economic structure channel and technology channel. And supply chain adjustment costs act as buffer effects that reduce the magnitudes of aforementioned two channels in the transitory dynamics. We find that distortion changes in sectors that generate significant sales through distant linkages to consumers are disproportionately damaging to the economy. Our results are robust in more general setups such as general constant return to scale production functions and heterogeneous supply chain adjustment costs across sectors.

We develop a dynamic model of production networks that firm entry and exit causes cascading effects along supply chain. The dynamics comes from the assumption that intermediate inputs are prepared one period before production. This model has closed-form solutions that we can directly dissect the roles that production networks, elastic labor, and especially the extensive margin at the sectoral level play in the business cycle. We quantitatively analyze the effects of elastic labor and firm entry and exit in the US productivity shock transmission. The spectral analysis shows that the leading eigencomponent represented by the energy, utility, and real estate sectors approximates the welfare impact of the US productivity shocks.

This paper measures the natural rates of interest of eleven economies including six OECD economies and five emerging economies of BRICS in a coherent time varying parameter vector autoregression framework. We find that the natural rates of interest in OECD economies have been descending especially since the 2007-2009 financial crisis. The trends of natural rates of BRICS economies do not share one common pattern. The descending trend of the natural rate of interest is a regional developed world phenomenon instead of a global one. Economic growth and Demographic structure are the dominant factors that affect the variations of natural rates of OECD economies compared with the factor of desire to safe assets while demographic structure is the most important factor for BRICS economies. (C) 2020 Elsevier Ltd. All rights reserved.

This paper studies the monetary policy of China in a flexible time-varying parameter vector autoregression model with stochastic volatility, with a focus on the monetary policy regime change around 2009 when the four trillion RMB stimulus started. We find that China has been transiting from targeting money quantity to targeting interest rate since 2009. The interest rate policy instrument played a bigger role in the central bank's monetary policy toolbox. We check an alternative identification strategy and a couple of different model settings to show the robustness of this conclusion.

Depositary receipts are financial instruments that enable companies to get public traded in a foreign stock market. China is under way launching such a programme with the stock market in Frankfurt. As a first step, German bluechips companies should be allowed issuing Chinese Depositary Receipts (CDRs) on the Shanghai Stock Exchange. This paper aims to answer the question what could be the potential benefits for German companies in doing so. To answer it, we investigate the firm value and operating performance of non-U.S. companies that issued Level 2 and Level 3 ADRs as comparable peer-group. Our dataset consists of 28 companies from 9 developed countries, crosslisted on major U.S. stock exchanges during the period 2002-2018. We provide evidence that these cross-listed companies experience improvements in their firm value after the listing, relative to a noncross-listed matched sample of companies and relative to the pre-listing period. However, there is no evidence that the operating performance has improved as well. Sino-German Center of Finance and Economics Association since 2015 https://sgc.frankfurt-school.de At Frankfurt School of Finance & Management Adickesallee 32-34 60322 Frankfurt Germany

I propose the 5-year forecast of ex ante real interest rate in the time varying parameter vector autoregression model with stochastic volatility as a measure of the natural rate of interest of China. The natural rate of China varied around 1.6% before 2010 when the 4 trillion RMB stimulus ended, and then exhibited an obvious descending trend from around 1.8% to recent 0.4%. This is similar to the descending trend found in the studies of advanced economies.