nep-tra New Economics Papers
on Transition Economics
Issue of 2016‒08‒14
six papers chosen by
J. David Brown
United States Census Bureau

  1. Firm Response to Competitive Shocks: Evidence from China's Minimum Wage Policy By Hau, Harald; Huang, Yi; Wang, Gewei
  2. Dynamic portfolio strategy using clustering approach By Fei Ren; Ya-Nan Lu; Sai-Ping Li; Xiong-Fei Jiang; Li-Xin Zhong; Tian Qiu
  3. The Road to International Currency: Global Perspective and Chinese Experience By Liu, Tao; Wang, Xiaosong
  4. Dynamic structure of stock communities: A comparative study between stock returns and turnover rates By Li-Ling Su; Xiong-Fei Jiang; Sai-Ping Li; Li-Xin Zhong; Fei Ren
  5. Quantifying the Effects of the CNB's Exchange Rate Commitment: A Synthetic Control Method Approach By Matej Opatrny
  6. The Impact of Agricultural and Trade Policies on Price Transmission in Central Asia By Bobokhonov, Abdulmajid; Pokrivcak, Jan; Rajcaniova, Miroslava

  1. By: Hau, Harald; Huang, Yi; Wang, Gewei
    Abstract: The large regional variation of minimum wage changes in 2002-08 implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labor to capital in low-wage firms, reduce employment growth, but also accelerate total factor productivity growth--particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labor cost shocks can be explained by differences in governance or management practice, but is difficult to reconcile with the idea that competitive pressure is a substitute for governance quality.
    Keywords: Firm productivity; management quality; minimum wage policy
    JEL: D24 G31 J24 J31 O14
    Date: 2016–08
  2. By: Fei Ren; Ya-Nan Lu; Sai-Ping Li; Xiong-Fei Jiang; Li-Xin Zhong; Tian Qiu
    Abstract: The problem of portfolio optimization is one of the most important issues in asset management. This paper proposes a new dynamic portfolio strategy based on the time-varying structures of MST networks in Chinese stock markets, where the market condition is further considered when using the optimal portfolios for investment. A portfolio strategy comprises two stages: selecting the portfolios by choosing central and peripheral stocks in the selection horizon using five topological parameters, i.e., degree, betweenness centrality, distance on degree criterion, distance on correlation criterion and distance on distance criterion, then using the portfolios for investment in the investment horizon. The optimal portfolio is chosen by comparing central and peripheral portfolios under different combinations of market conditions in the selection and investment horizons. Market conditions in our paper are identified by the ratios of the number of trading days with rising index or the sum of the amplitudes of the trading days with rising index to the total number of trading days. We find that central portfolios outperform peripheral portfolios when the market is under a drawup condition, or when the market is stable or drawup in the selection horizon and is under a stable condition in the investment horizon. We also find that the peripheral portfolios gain more than central portfolios when the market is stable in the selection horizon and is drawdown in the investment horizon. Empirical tests are carried out based on the optimal portfolio strategy. Among all the possible optimal portfolio strategy based on different parameters to select portfolios and different criteria to identify market conditions, $65\%$ of our optimal portfolio strategies outperform the random strategy for the Shanghai A-Share market and the proportion is $70\%$ for the Shenzhen A-Share market.
    Date: 2016–08
  3. By: Liu, Tao; Wang, Xiaosong
    Abstract: This paper studies the international currency use in financial transaction, with SWIFT dataset from 2011 to 2013. A currency becomes international when used outside of its issuing country, and advances to international vehicle currency if used among nonresidents. We estimate a gravity model to explain the geographical distribution of international currency use. For major currencies, higher level of integration and stable macroeconomic environment increase their international use. Specifically, trade and portfolio investment are more helpful in raising the direct use, while FDI has stronger effect in promoting the vehicle use. For RMB, trade improves the intensity of its global use, and FDI increases the number of its user. The policy effect on RMB internationalization is significant only for direct use. Additionally, major currencies experience death of distance, whereas RMB use is decreasing in geographical distance, implying its role to be more regional during this period. We recommend outward FDI by private Chinese firms to increase the vehicle use of RMB and make it truly international.
    Keywords: RMB internationalization, gravity model, policy effect, death of distance
    JEL: F33 F36 G15
    Date: 2016–07
  4. By: Li-Ling Su; Xiong-Fei Jiang; Sai-Ping Li; Li-Xin Zhong; Fei Ren
    Abstract: The detection of community structure in stock market is of theoretical and practical significance for the study of financial dynamics and portfolio risk estimation. We here study the community structures in Chinese stock markets from the aspects of both price returns and turnover rates, by using a combination of the PMFG and infomap methods based on a distance matrix. We find that a few of the largest communities are composed of certain specific industry or conceptional sectors and the correlation inside a sector is generally larger than the correlation between different sectors. In comparison with returns, the community structure for turnover rates is more complex and the sector effect is relatively weaker. The financial dynamics is further studied by analyzing the community structures over five sub-periods. Sectors like banks, real estate, health care and New Shanghai take turns to compose a few of the largest communities for both returns and turnover rates in different sub-periods. Several specific sectors appear in the communities with different rank orders for the two time series even in the same sub-period. A comparison between the evolution of prices and turnover rates of stocks from these sectors is conducted to better understand their differences. We find that stock prices only had large changes around some important events while turnover rates surged after each of these events relevant to specific sectors, which may offer a possible explanation for the complexity of stock communities for turnover rates.
    Date: 2016–08
  5. By: Matej Opatrny (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: In this paper I evaluate the quantitative effects of the Czech National Bank's commitment to keep the Koruna from appreciating that were put in place in 2013. I focus its on the impact on output, unemployment, and inflation. I use the synthetic control method, which allows me to compute the counter-factual development of the Czech economy in the absence of the commitment. I find that, until the end of 2015, the commitment helped create about 100,000 jobs. The effect on overall output is also strongly positive, almost 2% for growth in 2015, but only marginally statistically significant, which might be connected to disturbances created by changes in excise taxes. The effect of the commitment on inflation is positive but not statistically significant at standard levels.
    Keywords: Inflation, Unemployment, Output, Currency, Monetary Policy, Synthetic Control Method
    JEL: E42 E47 E50 E51 E52 E58
    Date: 2016–08
  6. By: Bobokhonov, Abdulmajid; Pokrivcak, Jan; Rajcaniova, Miroslava
    Abstract: This paper investigates the market integration between international and domestic markets in the case of two-transition countries namely Tajikistan and Uzbekistan. More specifically, our study aims to understand the extent and speed of price transmission from international to local market. We have used cointegration techniques to analyse the price transmission mechanism, such as a vector error correction model (VEC). We have found strong cointegration evidences between world market and domestic market of Tajikistan while no cointegration was observed in case of Uzbekistan. Tajikistan has liberal trade while Uzbekistan frequently used protectionist trade policy.
    Keywords: price transmission, market integration, agricultural trade, food prices, Tajikistan and Uzbekistan, Demand and Price Analysis, Q1,
    Date: 2016–07

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