Hwee Chow - Academia.edu (original) (raw)
Papers by Hwee Chow
This paper repeats Thornton's (1993) test of the rational expectations-permanent income hypot... more This paper repeats Thornton's (1993) test of the rational expectations-permanent income hypothesis (REPIH) for Singapore using an alternative data set based upon real disposable income and real consumer expenditure. In contrast to Thornton, but in line with most other studies, we find anticipated income to be significant and interpret this as evidence against the REPIH.
The ongoing global financial turmoil has revived the question of whether central bankers ought to... more The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary
This paper considers the choices facing the Asian tiger economies regarding growth strategies tha... more This paper considers the choices facing the Asian tiger economies regarding growth strategies that foster trans-Pacific rebalancing. A review of historical data spanning 2000 to 2008 reveals only a slight widening of the overall current account surplus but that there is considerable variation across the countries, with Hong Kong, China exhibiting the biggest increase in the saving and investment (S-I) balance. Meanwhile, cross-correlation coefficient estimates tentatively suggest that changes in the real effective exchange rate do not seem to exhibit a consistent negative lead over changes in the S-I gap in the short run over the past decade. High import leakage, particularly for the ultra small, open economies of Hong Kong and Singapore, calls into question the scope for recalibrating growth drivers towards domestic demand. Nonetheless, the implementation of structural policies such as those aimed at raising the productivity and wages of workers in the services industry as well as ...
... Citation Chow, Hwee Kwan, "A VAR Analysis of Singapore's Monetary Transmission Mech... more ... Citation Chow, Hwee Kwan, "A VAR Analysis of Singapore's Monetary Transmission Mechanism" (2004). Research Collection School of Economics. Paper 792. ... A VAR Analysis of Singapore'sMonetary Transmission Mechanism Hwee Kwan Chow September 2004 Paper No. ...
Asian-Pacific Economic Literature, 2008
In this paper we investigate the feasibility of a common currency peg in East Asia from the persp... more In this paper we investigate the feasibility of a common currency peg in East Asia from the perspective of Western European countries. We find that domestic outputs of East Asian countries are strongly influenced by country-specific shocks while regional shocks are far more important in European countries that have joined the Economic and Monetary Union. The results are robust to various changes in specifications of the model. They suggest that East Asian countries are structurally different from each other and thus more likely to be subject to asymmetric shocks. Based on optimum currency area grounds, a common currency peg in East Asia would be more costly and difficult to sustain.
Developments in the global electronics industry are typically monitored by tracking indicators th... more Developments in the global electronics industry are typically monitored by tracking indicators that span a whole spectrum of activities in the sector. However, these indicators invariably give mixed signals at each point in time, thereby hampering efforts at prediction. In this paper, we present a unified framework for forecasting the global electronics cycle by constructing a VAR model that captures
In post-crisis Asia, all crisis-hit countries (except Malaysia) announced a shift from exchange r... more In post-crisis Asia, all crisis-hit countries (except Malaysia) announced a shift from exchange rate based monetary policy framework to the explicit adoption of inflation targeting that uses interest rates as the key monetary policy operating instrument. In this study, we examine the empirical relationship between exchange rates and interest rates, and investigate how the dynamics between them have changed following the crisis. This is carried out by constructing a bivariate VAR-GARCH model for each of the four Asian crisis countries, namely Indonesia, Korea, Philippines and Thailand. The findings suggest these countries do not use interest rate policy more actively to stabilize exchange rates after the crisis, and provide evidence that their domestic currencies exhibit greater sensitivity to competitors’ exchange rates post-crisis. Further, the results indicate that increased exchange rate flexibility has not led to greater stability in interest rates in these economies.
As the countries in East Asia embark on financial liberalization, a key issue that confronts poli... more As the countries in East Asia embark on financial liberalization, a key issue that confronts policymakers is the greater complexity of risks that is injected into the financial system. In particular, capital account liberalization may potentially increase the vulnerability of individual countries to external financial shocks. This paper advocates the optimally cascading of financial liberalization that is consistent across three dimensions: extent of domestic financial liberalization; the degree of exchange rate flexibility; and the scope of capital account liberalization. Unless the process of liberalization is properly managed, it could provoke destabilizing capital flows and lead to volatile exchange rates. Smooth responses to fluctuating capital flows require accelerated institutional reforms in individual countries and an upgraded regional financial infrastructure. We argue that informal monetary arrangements, sequenced from simple to more intensive commitments, can go a long way in improving sovereign and regional institutions both to handle ongoing financial liberalization and to promote intra-regional currency stability.
The Singapore Economic Review, 2010
This paper considers the form of monetary policy coordination and regional exchange rate arrangem... more This paper considers the form of monetary policy coordination and regional exchange rate arrangement that would best support economic and financial integration in East Asia. In view of the region's economic diversity, we propose a graduated program of informal policy cooperation from weak forms of cooperation to more intensive modes of cooperation such as the adoption of common monetary policy objectives. An array of informal monetary arrangements rooted to the degree of institutional development can improve the effectiveness of both sovereign and regional institutions, and promote integration in East Asia. Drawing upon the European experience with the Exchange Rate Mechanism (ERM), we conclude that East Asia should first embark on other forms of integration to aid in the development of a high degree of real and nominal convergence amongst the regional countries. Only then would an ERM-type system that employs a regional monetary unit become more sustainable and less susceptible to speculative currency attacks in the region.
The Singapore Economic Review, 2010
This paper considers the form of monetary policy coordination and regional exchange rate arrangem... more This paper considers the form of monetary policy coordination and regional exchange rate arrangement that would best support economic and financial integration in East Asia. In view of the region's economic diversity, we propose a graduated program of informal policy cooperation from weak forms of cooperation to more intensive modes of cooperation such as the adoption of common monetary policy objectives. An array of informal monetary arrangements rooted to the degree of institutional development can improve the effectiveness of both sovereign and regional institutions, and promote integration in East Asia. Drawing upon the European experience with the Exchange Rate Mechanism (ERM), we conclude that East Asia should first embark on other forms of integration to aid in the development of a high degree of real and nominal convergence amongst the regional countries. Only then would an ERM-type system that employs a regional monetary unit become more sustainable and less susceptible to speculative currency attacks in the region.
A dynamic factor model is applied to a large panel dataset of Singapores macroeconomic variables ... more A dynamic factor model is applied to a large panel dataset of Singapores macroeconomic variables and global economic indicators with the initial objective of analyzing business cycles in a small open economy. The empirical results suggest that four common factors are present in the quarterly time series, which can broadly be interpreted as world, regional, electronics and domestic economic cycles. The estimated factor model explains well the observed fluctuations in real economic activity and price inflation, leading us to use it in forecasting Singapores business cycles. We find that the forecasts generated by the factors are generally more accurate than the predictions of univariate models and vector autoregressions that employ leading indicators.
Open Economies Review, 2009
Journal of Macroeconomics, 2003
In this paper we investigate the feasibility of a common currency peg in East Asia from the persp... more In this paper we investigate the feasibility of a common currency peg in East Asia from the perspective of Western European countries. We find that domestic outputs of East Asian countries are strongly influenced by country-specific shocks while regional shocks are far more important in European countries that have joined the Economic and Monetary Union. The results are robust to various changes in specifications of the model. They suggest that East Asian countries are structurally different from each other and thus more likely to be subject to asymmetric shocks. Based on optimum currency area grounds, a common currency peg in East Asia would be more costly and difficult to sustain.
Journal of Asian Economics, 2007
... trade competitiveness, stabilizing the nominal exchange rate may not be a suitable policy goa... more ... trade competitiveness, stabilizing the nominal exchange rate may not be a suitable policy goal ... 4. The VAR model is estimated using monthly data for the period of 1980:1 ... In particular, Malaysia adopted the US dollar peg while Indonesia, Korea, Philippines, Thailand and Taiwan ...
International Journal of Forecasting, 2006
Developments in the global electronics industry are typically monitored by tracking indicators th... more Developments in the global electronics industry are typically monitored by tracking indicators that span a whole spectrum of activities in the sector. However, these indicators invariably give mixed signals at each point in time, thereby hampering attempts at prediction. In this paper, we propose a unified framework for forecasting the global electronics cycle by constructing a VAR model that captures the economic interactions between putative leading indicators representing expectations, orders, inventories and prices. The ability of the indicators to presage world semiconductor sales is first examined by Granger causality tests. Subsequently, an impulse response analysis confirms the leading qualities of the selected indicators. Finally, out-of-sample forecasts of global chip sales are generated from two parsimonious variants of the VAR model, viz., the Bayesian VAR (BVAR) and Bayesian ECM (BECM), and compared with predictions from a bivariate model which uses a composite index of the leading indicators and a univariate autoregressive model. An evaluation of their relative accuracy suggests that the BVAR's forecasting performance is superior to the other models. The BVAR is also able to predict the turning points of the recent IT boom-and-bust cycle.
Economics Letters, 2003
In this paper we explore an alternative scheme to assess the suitability of adopting a common cur... more In this paper we explore an alternative scheme to assess the suitability of adopting a common currency by Western European countries. It is based on the role of common regional shocks in the determination of output. The results show that the OCA theory well explains and predicts participation decisions in EMU. We also find that our OCA index is highly
Journal of Asian Economics, 2014
ABSTRACT A DSGE-VAR approach was adopted to examine the managed exchange-rate system at work in S... more ABSTRACT A DSGE-VAR approach was adopted to examine the managed exchange-rate system at work in Singapore and to ask if the country had any reason to fear floating the exchange rate and adopting a Taylor rule. The results showed that, in terms of overall inflation volatility, the exchange rate rule had a comparative advantage over the Taylor rule when export-price shocks were the major sources of real volatility while a Taylor rule was preferable when domestic productivity shocks were dominant. The exchange-rate rule also dominated the Taylor rule for reducing inflation persistence.
This paper repeats Thornton's (1993) test of the rational expectations-permanent income hypot... more This paper repeats Thornton's (1993) test of the rational expectations-permanent income hypothesis (REPIH) for Singapore using an alternative data set based upon real disposable income and real consumer expenditure. In contrast to Thornton, but in line with most other studies, we find anticipated income to be significant and interpret this as evidence against the REPIH.
The ongoing global financial turmoil has revived the question of whether central bankers ought to... more The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary
This paper considers the choices facing the Asian tiger economies regarding growth strategies tha... more This paper considers the choices facing the Asian tiger economies regarding growth strategies that foster trans-Pacific rebalancing. A review of historical data spanning 2000 to 2008 reveals only a slight widening of the overall current account surplus but that there is considerable variation across the countries, with Hong Kong, China exhibiting the biggest increase in the saving and investment (S-I) balance. Meanwhile, cross-correlation coefficient estimates tentatively suggest that changes in the real effective exchange rate do not seem to exhibit a consistent negative lead over changes in the S-I gap in the short run over the past decade. High import leakage, particularly for the ultra small, open economies of Hong Kong and Singapore, calls into question the scope for recalibrating growth drivers towards domestic demand. Nonetheless, the implementation of structural policies such as those aimed at raising the productivity and wages of workers in the services industry as well as ...
... Citation Chow, Hwee Kwan, "A VAR Analysis of Singapore's Monetary Transmission Mech... more ... Citation Chow, Hwee Kwan, "A VAR Analysis of Singapore's Monetary Transmission Mechanism" (2004). Research Collection School of Economics. Paper 792. ... A VAR Analysis of Singapore'sMonetary Transmission Mechanism Hwee Kwan Chow September 2004 Paper No. ...
Asian-Pacific Economic Literature, 2008
In this paper we investigate the feasibility of a common currency peg in East Asia from the persp... more In this paper we investigate the feasibility of a common currency peg in East Asia from the perspective of Western European countries. We find that domestic outputs of East Asian countries are strongly influenced by country-specific shocks while regional shocks are far more important in European countries that have joined the Economic and Monetary Union. The results are robust to various changes in specifications of the model. They suggest that East Asian countries are structurally different from each other and thus more likely to be subject to asymmetric shocks. Based on optimum currency area grounds, a common currency peg in East Asia would be more costly and difficult to sustain.
Developments in the global electronics industry are typically monitored by tracking indicators th... more Developments in the global electronics industry are typically monitored by tracking indicators that span a whole spectrum of activities in the sector. However, these indicators invariably give mixed signals at each point in time, thereby hampering efforts at prediction. In this paper, we present a unified framework for forecasting the global electronics cycle by constructing a VAR model that captures
In post-crisis Asia, all crisis-hit countries (except Malaysia) announced a shift from exchange r... more In post-crisis Asia, all crisis-hit countries (except Malaysia) announced a shift from exchange rate based monetary policy framework to the explicit adoption of inflation targeting that uses interest rates as the key monetary policy operating instrument. In this study, we examine the empirical relationship between exchange rates and interest rates, and investigate how the dynamics between them have changed following the crisis. This is carried out by constructing a bivariate VAR-GARCH model for each of the four Asian crisis countries, namely Indonesia, Korea, Philippines and Thailand. The findings suggest these countries do not use interest rate policy more actively to stabilize exchange rates after the crisis, and provide evidence that their domestic currencies exhibit greater sensitivity to competitors’ exchange rates post-crisis. Further, the results indicate that increased exchange rate flexibility has not led to greater stability in interest rates in these economies.
As the countries in East Asia embark on financial liberalization, a key issue that confronts poli... more As the countries in East Asia embark on financial liberalization, a key issue that confronts policymakers is the greater complexity of risks that is injected into the financial system. In particular, capital account liberalization may potentially increase the vulnerability of individual countries to external financial shocks. This paper advocates the optimally cascading of financial liberalization that is consistent across three dimensions: extent of domestic financial liberalization; the degree of exchange rate flexibility; and the scope of capital account liberalization. Unless the process of liberalization is properly managed, it could provoke destabilizing capital flows and lead to volatile exchange rates. Smooth responses to fluctuating capital flows require accelerated institutional reforms in individual countries and an upgraded regional financial infrastructure. We argue that informal monetary arrangements, sequenced from simple to more intensive commitments, can go a long way in improving sovereign and regional institutions both to handle ongoing financial liberalization and to promote intra-regional currency stability.
The Singapore Economic Review, 2010
This paper considers the form of monetary policy coordination and regional exchange rate arrangem... more This paper considers the form of monetary policy coordination and regional exchange rate arrangement that would best support economic and financial integration in East Asia. In view of the region's economic diversity, we propose a graduated program of informal policy cooperation from weak forms of cooperation to more intensive modes of cooperation such as the adoption of common monetary policy objectives. An array of informal monetary arrangements rooted to the degree of institutional development can improve the effectiveness of both sovereign and regional institutions, and promote integration in East Asia. Drawing upon the European experience with the Exchange Rate Mechanism (ERM), we conclude that East Asia should first embark on other forms of integration to aid in the development of a high degree of real and nominal convergence amongst the regional countries. Only then would an ERM-type system that employs a regional monetary unit become more sustainable and less susceptible to speculative currency attacks in the region.
The Singapore Economic Review, 2010
This paper considers the form of monetary policy coordination and regional exchange rate arrangem... more This paper considers the form of monetary policy coordination and regional exchange rate arrangement that would best support economic and financial integration in East Asia. In view of the region's economic diversity, we propose a graduated program of informal policy cooperation from weak forms of cooperation to more intensive modes of cooperation such as the adoption of common monetary policy objectives. An array of informal monetary arrangements rooted to the degree of institutional development can improve the effectiveness of both sovereign and regional institutions, and promote integration in East Asia. Drawing upon the European experience with the Exchange Rate Mechanism (ERM), we conclude that East Asia should first embark on other forms of integration to aid in the development of a high degree of real and nominal convergence amongst the regional countries. Only then would an ERM-type system that employs a regional monetary unit become more sustainable and less susceptible to speculative currency attacks in the region.
A dynamic factor model is applied to a large panel dataset of Singapores macroeconomic variables ... more A dynamic factor model is applied to a large panel dataset of Singapores macroeconomic variables and global economic indicators with the initial objective of analyzing business cycles in a small open economy. The empirical results suggest that four common factors are present in the quarterly time series, which can broadly be interpreted as world, regional, electronics and domestic economic cycles. The estimated factor model explains well the observed fluctuations in real economic activity and price inflation, leading us to use it in forecasting Singapores business cycles. We find that the forecasts generated by the factors are generally more accurate than the predictions of univariate models and vector autoregressions that employ leading indicators.
Open Economies Review, 2009
Journal of Macroeconomics, 2003
In this paper we investigate the feasibility of a common currency peg in East Asia from the persp... more In this paper we investigate the feasibility of a common currency peg in East Asia from the perspective of Western European countries. We find that domestic outputs of East Asian countries are strongly influenced by country-specific shocks while regional shocks are far more important in European countries that have joined the Economic and Monetary Union. The results are robust to various changes in specifications of the model. They suggest that East Asian countries are structurally different from each other and thus more likely to be subject to asymmetric shocks. Based on optimum currency area grounds, a common currency peg in East Asia would be more costly and difficult to sustain.
Journal of Asian Economics, 2007
... trade competitiveness, stabilizing the nominal exchange rate may not be a suitable policy goa... more ... trade competitiveness, stabilizing the nominal exchange rate may not be a suitable policy goal ... 4. The VAR model is estimated using monthly data for the period of 1980:1 ... In particular, Malaysia adopted the US dollar peg while Indonesia, Korea, Philippines, Thailand and Taiwan ...
International Journal of Forecasting, 2006
Developments in the global electronics industry are typically monitored by tracking indicators th... more Developments in the global electronics industry are typically monitored by tracking indicators that span a whole spectrum of activities in the sector. However, these indicators invariably give mixed signals at each point in time, thereby hampering attempts at prediction. In this paper, we propose a unified framework for forecasting the global electronics cycle by constructing a VAR model that captures the economic interactions between putative leading indicators representing expectations, orders, inventories and prices. The ability of the indicators to presage world semiconductor sales is first examined by Granger causality tests. Subsequently, an impulse response analysis confirms the leading qualities of the selected indicators. Finally, out-of-sample forecasts of global chip sales are generated from two parsimonious variants of the VAR model, viz., the Bayesian VAR (BVAR) and Bayesian ECM (BECM), and compared with predictions from a bivariate model which uses a composite index of the leading indicators and a univariate autoregressive model. An evaluation of their relative accuracy suggests that the BVAR's forecasting performance is superior to the other models. The BVAR is also able to predict the turning points of the recent IT boom-and-bust cycle.
Economics Letters, 2003
In this paper we explore an alternative scheme to assess the suitability of adopting a common cur... more In this paper we explore an alternative scheme to assess the suitability of adopting a common currency by Western European countries. It is based on the role of common regional shocks in the determination of output. The results show that the OCA theory well explains and predicts participation decisions in EMU. We also find that our OCA index is highly
Journal of Asian Economics, 2014
ABSTRACT A DSGE-VAR approach was adopted to examine the managed exchange-rate system at work in S... more ABSTRACT A DSGE-VAR approach was adopted to examine the managed exchange-rate system at work in Singapore and to ask if the country had any reason to fear floating the exchange rate and adopting a Taylor rule. The results showed that, in terms of overall inflation volatility, the exchange rate rule had a comparative advantage over the Taylor rule when export-price shocks were the major sources of real volatility while a Taylor rule was preferable when domestic productivity shocks were dominant. The exchange-rate rule also dominated the Taylor rule for reducing inflation persistence.