Rural Poverty in China: Problem and Policy

This paper describes the economic conditions of rural China regarding poverty. By dividing the problem of rural poverty into three components it explains why rural poverty is China’s No. 1 economic problem in spite of the significant improvement in the living standard of the rural population. After discussing the solution proposed by the Chinese government it raises two policy questions, one concerning a proposal to eliminate the operational functions of township governments in the streamlining of the local government structure and the second on the possibility of controlling the abuse of power by local party officials that infringes on the rights of the farmers. A comparison with the conditions in India is provided.

Equity Premium and Consumption Sensitivity When the Consumer- Investor Allows for Unfavorable Circumstances

Introducing one additional element due to possible misfortune to the return of each of two assets in the basic model of Samuelson (Rev.Econom.Statist.51 (1969)239)on optimum portfolio and consumption decisions,this paper resolves both the excess equity premium and the excess consumption sensitivity puzzles.This uni ed treatment provides a framework to study how important state variables will a ect the change in aggregate consumption which is consid- ered unpredictable in one formulation of the permanent income hypothesis.The implications of the theory agree with empirical results reported here and elsewhere.The theoretical framework appears to be simple and powerful as compared with alternative theories to explain the two puzzles.Optimum consumption and investment;Asset pricing;Consumption sensitivity;Robust control; The Lagrange method

Shanghai Stock Prices as Determined by the Present Value Model

Derived from the present-value model of stock prices, our model implies that the log stock price is a linear function of expected log dividends and the expected rate of growth of dividends where expectations are formed adaptively. The model explains very well the prices of 47 stocks traded on the Shanghai Stock Exchange observed at the beginning of 1996, 1997, and 1998. The estimated parameters are remarkably similar to those reported for stocks traded on the Hong Kong Stock Exchange and the New York Stock Exchange.Finance

Rational Expectations is Not Necessarily Valid for Econometric

Marcoeconomics

China's Economic Policy in the Context of the Asian Finanacial Crisis

This paper is based closely on the author's Y. C. Jao lecture presented to the Hong Kong Economic Association in November 1998.Macroeconomics

Duplicating Contingent Claims by the Lagrange Method

The problem of investing y(0) dollars at time 0 to duplicate a contigent claim is formulated as a dynamic optimization problem and solved by the Langrange method. If the function defining dy(t) is concave in y(t), owing to costs of trading in incomplete markets, there is an economy of scale in producing many claims simultaneously, thus explaining the profitability of institutions in providing such financial services.Finance

A Time-Series Analysis of the Shanghai and New York Stock Price Indices

A time series analysis of the Shanghai and New York Stock Exchange composite price indices is provided to compare the weekly rates of return and volatilities of these two markets and to study their co-movement in 1992-2002. The rate of return and volatility of the Shanghai market were higher. The rates of returns in the two markets were approximately serially uncorrelated and mutually uncorrelated. Volatility, as measured by the absolute change in the rate of return, has positive serially correlations in both markets as expected, but the autoregressions are temporarily unstable. Most surprisingly the volatility measures of the two markets are significantly negatively correlated. Volatility in each market was found to Granger cause volatility in the other market negatively. This spurious correlation is explained by the negative correlations of macroeconomic fundamentals in the United States and China as indicated by a negative correlation between the rates of change in their GDP while their capital markets are not integrated. The analysis has implications for the use of autoregressions and Granger causality tests, and the interpretation of spurious correlation.Time series analysis; Rate of return; Volatility; Autogressions; Granger causality; Spurious correlation; Shanghai stock price; New York stock price

A Model for National Income Determination in Taiwan

Following Chow (1985 and 2010) and using annual data from 1951 to 2010 for Taiwan this paper estimates a consumption function based on the permanent income hypothesis and an investment function based on the accelerations principle. The data support the permanent income hypothesis Friedman (1957) whereas the permanent income hypothesis of Hall (1978) was supported in Chow (1985 and 2010). The accelerations principle is strongly supported, as in the case of China. An explanation why the two economies have different consumption functions is given.consumption, investment, permanent income, Taiwan, macroeconomics