Monetary policy, asset prices and consumption in China

This paper studies the wealth channel in China. Using the structural vector autoregression method, we find that a loosening of China’s monetary policy indeed leads to higher asset prices, which in turn are linked to household consumption. However, the importance of the wealth channel as a part of the monetary policy transmission mechanism in China is still limited.China; monetary policy; asset prices

Do efficient banking sectors accelerate economic growth in transition countries

The relationship between financial sector and economic growth in transition countries has been largely ignored in the earlier empirical literature. In this paper, we analyse the finance-growth nexus using a fixed-effects panel model and unbalanced panel data from 25 transition countries during the period 1993-2000. We measure the qualitative development in the banking sectors using the margin between lending and deposit interest rates. Our second variable for the level of financial sector development is the amount of bank credit allocated to the private sector as a share of GDP. According to our results, the interest rate margin is significantly and negatively related to economic growth. This outcome is in line with theoretical models and has important policy implications. On the other hand, a rise in the amount of credit does not seem to accelerate economic growth. The main reasons behind this result could be the numerous banking crises the transition countries have experienced and the soft budget constraints that are still prevalent in many transition countries. Due to these specific characteristics the growth in credit has not always been sustainable and in some cases it may have led to a decline in growth rates.financial sector; transition economies; economic growth; panel data

Reduced form models of bond portfolios

We derive simple return models for several classes of bond portfolios. With only one or two risk factors our models are able to explain most of the return variations in portfolios of fixed rate government bonds, inflation linked government bonds and investment grade corporate bonds. The underlying risk factors have natural interpretations which make the models well suited for risk management and portfolio design

Financial Systems in Transition: Could Small Actually Be Beautiful?

CEEC; Russia

Do efficient banking sectors accelerate economic growth in transition countries?

The relationship between financial sector and economic growth in transition countries has been largely ignored in the earlier empirical literature. In this paper, we analyse the finance-growth nexus using a fixed-effects panel model and unbalanced panel data from 25 transition countries during the period 1993-2000. We measure the qualitative development in the banking sectors using the margin between lending and deposit interest rates. Our second variable for the level of financial sector development is the amount of bank credit allocated to the private sector as a share of GDP. According to our results, the interest rate margin is significantly and negatively related to economic growth. This outcome is in line with theoretical models and has important policy implications. On the other hand, a rise in the amount of credit does not seem to accelerate economic growth. The main reasons behind this result could be the numerous banking crises the transition countries have experienced and the soft budget constraints that are still prevalent in many transition countries. Due to these specific characteristics the growth in credit has not always been sustainable and in some cases it may have led to a decline in growth rates.financial sector, transition economies, economic growth, panel data

Can the Chinese trade surplus be reduced through exchange rate policy?

This paper shows empirically that China’s trade balance is sensitive to fluctuations in the real effective exchange rate of the renminbi, although the size of the surplus is such that exchange rate policy alone will be unable to address the imbalance. One of the main reasons why the reduction in the trade surplus is limited is that Chinese imports are reduced with a real appreciation of the renminbi. By estimating bilateral import equations, we find that it is imports from other Southeast Asian countries which fall. This result reflects the vertical integration of Southeast Asia with China through the 'Asian production network'. We find, in turn, that imports from Germany – which serve China’s domestic demand – behave as one would expect, ie they increase with renminbi real appreciation. All in all, our results raise concerns on the impact of renminbi appreciation on Southeast Asia even if regional currencies do not follow the renminbi’s upward trajectory.China; trade; exports; real exchange rate

On diversity effects of alternative agricultural policy reforms in Finland: An agricultural sector modelling approach

The aim of this study is to predict diversity effects of agricultural policy reforms in which direct aid payments are disconnected from production, and compare the outcomes with effects of such a policy in which CAP support is coupled. The study employs the dynamic regional sector model of Finnish agriculture. The sector model predicts regional land use, stocking densities, pesticide application areas, and nutrient balances

McCallum rule and Chinese monetary policy

This paper evaluates the usefulness of a McCallum monetary policy rule based on money supply for maintaining price stability in mainland China. We examine whether excess money relative to rulebased values provides information that improves the forecasting of price developments. The results suggest that our monetary variable helps in predicting both consumer and corporate goods price inflation, but the results for consumer prices depend on the forecasting period. Nevertheless, growth of the Chinese monetary base has tracked the McCallum rule quite closely. Moreover, results using a structural vector autoregression suggest that our measure of excess money supply could be used to identify monetary policy shocks in the Chinese economy.McCallum rule; monetary policy; China

Why do people share online? Online disinhibition effect in the context of the virtual community of Reddit

For the past two decades, the growth of Internet has been truly exponential. Although there is nothing deterministic about the effects of this technological revolution, it is evident that the Internet is changing our behavior in fundamental ways. One recent expression of the Internet culture is the website reddit.com, which describes itself as "the front page of Internet". In their personal stories the users of Reddit share everything from their financial problems to their illegal venture. And to every touching story about struggling with depression there is a startlingly rude joke about the said depression. What motivates people to share their stories in Reddit even though not necessarily a single user will remember their username? One of the biggest influencers on how we behave online is the online disinhibition effect. To unerstand the site and its communications in a fundamental way, I decided to study the online disinhibition effect in the virtual community of Reddit through netnography. For a period of one year, I participated in the community, aiming to document the experiences of others and myself on the site. According to my research the characteristics typical to Reddit communications: anonymity, lack of cues, and text-basedness affect change the way we communicate on the site, compared to how we communicate face-to-face. When communicating on the site, redditors are able to dissociate themselves from their daily life and identity and assume instead communications' culture, values and morals associated with the virtual community of Reddit. Thus, online disinhibition effect in Reddit means not abandoning all norms but conforming to new ones. All of this is meaningful for the community members because disinhibited behavior gives redditors feelings of empowerment or perceived capabilities in coping with various challenges and overcoming obstacles. Online disinhibition can create empowering experiences through venting, finding similar others, and heightened feelings of self-efficacy as well as receiving emotional support. Thus, people behave disinhibitedly online to feel more powerful and capable. My research contributes to the field of consumer research, although I borrow concepts and ideas vastly from the fields of social psychology and communications studies. Through understanding the phenomena of online disinhibition better, I hope to contribute to the discourse on virtual communities and brand communitie

Book Review: Contemporary American Women: Our Defining Passages

Review of Contemporary American Women: Our Defining Passages, compiled and edited by Carol Smallwood and Cynthia Brackett-Vincen