AMU - AMSE
5-9 Boulevard Maurice Bourdet, CS 50498
13205 Marseille Cedex 1
This chapter provides a review of the recent literature on bubble testing in real estate markets. Starting from a theoretical overview of the specificities of real estate assets we assess the latest econometric methodology to detect the periods when a real estate bubble is present. In an illustration for the case of Japan's house prices over four decades, we focus on a two-step econometric strategy to first filter out the fundamental component in the price-to-rent ratio and then test for the possible explosive character of the, non-fundamental, residual. Such a strategy enables researchers both to avoid misleading signals about spurious bubbles, and to detect bubbles which may be hidden when focusing only on the price-to-rent ratio.
The pre-Global Financial Crisis build-up, followed by the post-crisis collapse, in bank liquidity creation in developed countries is well-documented (Berger and Bowman, Berger and Bouwman, Review of Financial Studies 22:3779–3837, 2009). Comparable analyses on developing and emerging countries (DECs) have been severely hindered by the lack of detailed bank-by-bank balance sheet data. This paper proposes a new, high-frequency, Aggregate Bank Liquidity Creation (A-BLC) measure for 114 DECs on a comparable cross-country basis, which relies on macroeconomic, country-wide, banking systems’ balance sheet data. The A-BLC database allows us to assess the extent of bank fragility arising from illiquidity associated with intermediation at the banking system level for every DEC, at a monthly frequency over the period 2001–2016. Our measure captures more accurately than other measures proposed in the literature the evolution of bank liquidity creation in the DECs. Stylised facts and panel-regression analysis suggest a sharp pre-crisis build-up and post-crisis fall in liquidity creation in DECs, larger then that observed for developed countries. In addition, financial depth and stability appear as particularly important drivers of A-BLC in DECs.
This paper examines the impact of exchange-rate regime change on the price disparity of China’s dual-listed stocks. We use four years of synchronous intraday data of 26 pairs of dual-listed RMB-denominated A-shares and their corresponding HKD-denominated H-shares. The sample period covers the 2005 and 2008 changes in the exchange rate regime. During that time, the Chinese authorities strictly prohibited short selling of stocks and tightly regulated capital flows. In contrast to the existing general findings, we find that the law of one price can be strengthened for dual-listed stocks (DLSs) in segmented capital markets under a flexible exchange rate regime; the disparity between the DLSs is reduced under the managed float compared to the pegged regime. Moreover, we find that the magnitude of the H-share discount is positively related to the expected RMB appreciation under managed float; however, under the pegged regime the relationship is negative.
We empirically examine the effectiveness of EU Border carbon adjustment (BCA) in the context of BRI, by developing a hypothetical BCA scheme based on a multi-regional Input-Output model. We use various evaluation criteria such as sectoral coverage, economic condition of trade partners, compliance with trade regulations, and selection of Best Available Technology (BAT). Our analysis shows that the EU-BCA scheme covers 44% of the global traded emissions, of which 84% are generated in the BRI regions. However, the BAT principle and trade provisions reduce the coverage of BCA emissions for BRI regions, while assumptions about the carbon intensity of imports result in a further reduction. Our findings both cast serious doubt on BCA's ability to drive industrial decarbonisation and alleviate domestic producers' competitiveness concerns, and support the argument that EU-BCA may level the playing field for the EU's domestic market but may not address competitiveness concerns in other (non-EU) markets.
Market-oriented housing reforms and the rapid urbanization process have led to spectacular growth in the Chinese real estate sector (RES). However, the changes in the role played by this sector in the structural dynamics of the Chinese economy have not been examined sufficiently. Accordingly, we analyze the intersectoral structural changes to the Chinese RES, its linkages with the rest of the economy, and its growth sources, using four Chinese input–output tables from 2002 to 2017. We depart from existing work on the RES by using the causative matrix approach and structural decomposition analysis, and obtain three main results. First, the RES, which received little non-RES feedback during the 2002–2007 period, has subsequently received much more substantial feedback. Second, the impact of the RES on China's economic growth stems mainly from its forward linkages. Third, the growth in the RES has been driven mainly by domestic demand expansion. Our results highlight that the Chinese RES, which plays a key role in value chains, is highly dependent on its own final demand and a fall in its demand would impede economic development. An important implication of these results is that developing the national economy by stimulating the RES would not be as effective as developing the RES through stimulating the national economy.
Central bank communication is becoming a key aspect of monetary policy. How much financial markets listen and, possibly, understand Banco de Mexico’s communication on its monetary policy stance should be a key consideration for the central bank to further modernize its monetary policy toolkit. In this paper, we tackle this issue empirically by using our own index of the tone of communication based on Banco de Mexico’s speeches and statements and find that Mexican money markets do not only listen but they also understand the stance of monetary policy conveyed in the central bank’s words. Regarding the ability to listen we find that both the volatility and volume in the money market rates change right after communication from Banco de Mexico’s governing body. As for the markets’ understanding, we document a statistically significant rise in money market rates the more hawkish communication is. All in all, our results show strong evidence of effective oral and written communication from the Central Bank towards Mexico’s money markets.
In this study, we investigate monthly seasonality in the foreign exchange market. Given the well-known recurrent higher returns in some month than in others in stock markets around the world, we consider it likely that a seasonal outperformance of a country’s stock market over another is associated with similar seasonal patterns in capital flows and exchange rates. A seasonal profit (carry trade) opportunity can be created by the simultaneous appreciation of a country’s currency and the outperformance of its stock market. By focusing on the world’s key currency pairs, the US dollar-Deutsche mark and the US dollar-euro, and by using a Markov-switching framework, we document persistent January and December effects in the foreign exchange market from 1971 to 2017. Analysis of the German-US stock returns differential and their bilateral capital flows reveal similar month effects in 65% of the whole sample.
Mainstream research has rationalized China’s stock market on the basis of paradigms such as the institutional approach, the efficient market hypothesis, and corporate valuation principles. The deviations from such paradigms have been analyzed as puzzles of China’s stock market. Girardin and Liu explore to what extent, in the perspective of Chinese cultural and historical characteristics, far from being puzzles, these 'deviations’ are rather the symptoms of a consistent strategy for the design, development and regulation of a government-dominated financial system. This book will help investors, observers and researchers understand the hidden logic of the design and functioning of China’s modern stock market, taking a political economy view.
In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to “bubble” concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai. However many observers and researchers argue that fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on the government housing prices which may suffer from the well-documented downward bias, this paper uses original high frequency unit price as well as transaction series for the residential resale housing markets of Beijing and Shanghai between January 2005 and December 2010 to test alternative hypotheses about housing prices volatility.
This paper shows the uneven role played in the inflation dynamics of African franc zone countries by their integration in a regional monetary union. We obtain three main results sharply contrasting the central- (CEMAC) and west-African (WAEMU) regions. First, differences in the structure of economies and national fiscal stances play a similar role in both unions and appear as potential sources of inflation differentials. Second, even though co-movements are the principal drivers of inflation dynamics in both subregions, global factors dominate regional ones in WAEMU while both play an equal role in CEMAC. Thirdly, spatial interactions are unimportant in CEMAC due to little intra-zone trade, but take an asymmetric form in WAEMU due to the large size of Ivory Coast and Senegal.