Renato Reside | University of the Philippines Diliman (original) (raw)

Papers by Renato Reside

UPSE Discussion Papers are preliminary versions circulated privately to elicit critical comments.... more UPSE Discussion Papers are preliminary versions circulated privately to elicit critical comments. They are protected by Copyright Law (PD No. 49) and are not for quotation or reprinting without prior approval.

The Asian financial crisis has confirmed the need to develop further the long-term domestic bond ... more The Asian financial crisis has confirmed the need to develop further the long-term domestic bond markets in the region. Despite generally high rates of saving, long-term savings have not been efficiently mobilized. Private-sector investments in rapidly growing emerging economies have

The Asian financial crisis has impaired the flow of capital financing the construction of infrast... more The Asian financial crisis has impaired the flow of capital financing the construction of infrastructure crucial for sustaining development in the country. As such, one of the post-crisis challenges has been the development of new and alternative financing mechanisms in light of emerging fiscal constraints of government. This paper presents an analysis of the recent trends and financing needs of infrastructure projects and explores various alternative modalities for the financing of infrastructure projects in the Philippines.

Over the last few years, multilateral lending institutions and governments have expressed increas... more Over the last few years, multilateral lending institutions and governments have expressed increasing concern over the accumulation of contingent liabilities and their role in aggravating fiscal and financial fragility in developing economies. The accumulation of these contigent liabilities, brought about mostly by the provision of government gurarantees, has prompted researchers to more closely scrutinize government contracts, specifically contracts for the provision of infrastructure goods and services in projects where there is private sector participation. The problem with these contracts seems to stem from adverse selection. Because of the adverse selection problem, contracts negotiated by government with private investors do not seem to be designed in a manner that achieves an optimal sharing of risk. As a result, the government is saddled with financial claims: investors seeking compensation for risks assumed by government. This study uses a simple model to solve for the optim...

This study uses panel data on a sample of non-government organizations (NGOs) to estimate the fac... more This study uses panel data on a sample of non-government organizations (NGOs) to estimate the factors that motivate donors to contribute to them. The results of empirical estimation suggest that a mix of conventional and tax factors influence donors. The results are consistent with the hypothesis that donors are not totally altruistic and are motivated by private benefits from donating. There is strong evidence that the private benefits come more from tax concessions from the act of donating. Hence, tax planning and arbitrage motives, more than “warm glow” factors influence donor contributions. JEL Codes : C80 D64 H26

Journal of international business research, 2008

This study analyzes global stress in public-private partnerships in infrastructure investment. Wh... more This study analyzes global stress in public-private partnerships in infrastructure investment. While project failures seldom occur, there are many stresses, such as broad political risk: the ability of the highest government executives to use discretion to make sweeping changes to investment rules or interventions in regulation that adversely affect a project’s market value. This includes protracted tariff freezing. However, this is usually only realized after other risks, such as currency risk, have materialized first. Thus, broad political risk can be controlled (one way to do this is to exert strong efforts to build local currency debt markets). Other causes of stress include opportunistic government behavior and price cap regulation, which may needs to be strengthened to adapt to crisis situations. Except for political risk guarantees, loans and equity from multilateral institutions have no effect on outcomes. Ironically, strong growth and rigid currency regimes before projects ...

The rationale for this paper is the increasing amount of risk that the Philippine government has ... more The rationale for this paper is the increasing amount of risk that the Philippine government has been assuming in the last ten years, primarily in the development of various modalities for encouraging private sector participation in infrastructure development and the provision of guarantees for loans of government-owned and controlled corporations (GOCCs). The Philippine government is often not prepared to deal with the financial and non-financial consequences of calls on such guarantees, some of which are triggered by circumstances under its control. With better coordination among line agencies, the DoF, and the BSP, better project preparation, and more prudent provision of guarantees, the large costs of state support could have been avoided. Henceforth, one of the major objectives of this task is to quantify the amount of risk that the government assumes in such activities using conventional scientific and statistical methods presently being employed by private financial instituti...

The objective of the paper is to estimate a structural model of the Philippine economy using vect... more The objective of the paper is to estimate a structural model of the Philippine economy using vector autoregression (VAR) methodology. The structural model being estimated is a traditional Keynesian AS-AD model of macroeconomic fluctuations. This model predicts that in the short-run, transitory shocks (in the structural VAR model), interpreted as aggregate demand shocks, move output and prices in the same direction and are neutral with respect to output in the long-run, but affect prices. On the other hand, permanent shocks, interpreted as aggregate supply shocks, raise output and lower prices in the short- and long-run. A reduced form bivariate VAR (in output and prices) for the Philippines is estimated, and iversion of the estimated VAR yields a decomposition of output and prices into a moving average of orthogonal output and price shocks. Since this is a reduced-form model, no structural interpretation can be given to the estimates. Restrictions based on theory are imposed, and th...

This study analyzes cross-country data extracted from a large global database to identify the maj... more This study analyzes cross-country data extracted from a large global database to identify the major risks affecting Asian PPP into six major factors : (1) macroeconomic environment; openness of economy; (2) incentive issues during planning, design and contracting phases; (3) political risk; (4) fiscal capacity of government; (5) firm-embodied traits : level of technical efficiency and capacity of proponents in construction and operations; and (6) other reasons-- regulation, credit risk of buyers of output, etc. Policy recommendations are made.

The effect of monetary policy on output growth and inflation is examined in a monetary endogenous... more The effect of monetary policy on output growth and inflation is examined in a monetary endogenous growth model with an explicit banking sector that intermediates capital. Monetary policy is coordinated with fiscal policy in the sense that all the seigniorage revenue gleaned through the inflation tax is spent to make efficient provision of public services. With the reserve requirement and money growth as instruments, policy coordination implies that one instrument may be solved endogenously when the other is predetermined. A higher reserve requirement being a binding constraint on capital creation generates adverse growth ffects. On the other hand, by endogenously reducing the money growth rate, a higher reserve requirement lowers inflation. Interestingly, when public services are not productive, policies need not be coordinated. In this scenario, we derive a non-standard result wherein a rise in reserve requirements raises inflation. We conclude with the suggestion that differences ...

This study is an offshoot of a project on the estimation of contigent liabilities of the Philippi... more This study is an offshoot of a project on the estimation of contigent liabilities of the Philippine government. The Monte Carlo simulation method adopted for estimating exposure (or expected losses) to NG-assumed risks in many Build-Operate-Transfer infrastructure projects makes it possible for policymakers to classify and rank projects according to risk, and set risk-adjusted guarantee fees, helping to mitigate many adverse selection and moral hazard problems in the project appraisal, approval, and monitoring process. Six projects (not explicitly identified) are analyzed for risk, and risk indicators are constructed for each to facilitate comparison and classification. Projects for which government bears excessive risk may be restructured before approval, while contigency financing may be arranged for projects that have already commenced operations. In addition, expected lesses serve as an input into the calculation of actuarially-fair guarantee premia.

This study estimates determinants of remittances to the Philippines. Remittance growth responds t... more This study estimates determinants of remittances to the Philippines. Remittance growth responds to real growth in the Philippines and in host countries, exchange rates, interest and deployment rates, inflation, as well as to immigration and employment policies. While most studies conclude that remittances are exclusively either driven by altruistic or self-interested motives, the evidence in this study supports remittances driven by both. The dual nature of remittances means that remittances can contribute to both consumption smoothing and business cycle amplification. Thus, remittances can be either countercyclical or procyclical depending on the shocks affecting them. Nominal price and exchange rate shocks give rise to the former response, while real shocks lead to the latter response.

Optimal contracts are derived from a simple model where government guarantees two types of privat... more Optimal contracts are derived from a simple model where government guarantees two types of private investors participationg in infrastructure projects. With asymmetric information, investors are offered a pair of incentive-compatible contracts covering production, tariff, and guarantee coverage. Both contracts offer identical production quantities, but the contract designed for high risk investors offers over-insurance and tariff below marginal cost, while the contract designed for low risk investors offers under-insurance with tariff above marginal cost, while the contract designed for low risk investors offers under-insurance with tariff above marginal cost. This benchmark outcome may motivate solutions to adverse selection, incentive and risk-sharing problems in contracts involving private sector participation in infrastructure development projects in the Philippines.

Based on Soyoung Kim's previous work for non-US G6 countries, I use eveidence from recursive ... more Based on Soyoung Kim's previous work for non-US G6 countries, I use eveidence from recursive vector autoregressions (VARs) in order to analyze the international transmission mechanism of expansionary US monetary policy shocks to other countries. The method not only attempts to ascertain the workings of the mechanism itself, but it also tries to discern which theoretical model's predictions (Mundell-Fleming vs. the intertemporal model of Obstfeld and Rogoff) fit the data best. For the Philippines, at least, the initial evidence suggests that the transmission mechanism follows the traditional Mundell-Fleming model (a US monetary expansion is beggar-thy-neighbor and works primarily through exchange rate and trade balance effects).

A vector autogregression (VAR) is defined as a vector of endogenous variables regressed against i... more A vector autogregression (VAR) is defined as a vector of endogenous variables regressed against its own lags. VARs therefore are considered part of a general class of simultaneous equations models. By construction, VAR analysis allows us to examine over time the dynamic impacts of innovations to variables on others. The following is a survey of the literature of vector autoregressions (VARs) in the last twenty years since it was first used for policy analysis for Christopher Sims (1980). Identification of a VAR model initially involved the imposition of a recursive structure on models. Since authors using VAR models provided insufficient justification for using a recursive structure, VAR modeling was criticized as atheoretical. In the last decade, however, a number of authors have attempted to remedy the problem by introducing new structural identification techniques. This has enhanced the ability of VARs to model the economy. VAR studies have been used primarily to identify the imp...

In its desire for closure in critical infrastructure projects undertaken by the private sector, t... more In its desire for closure in critical infrastructure projects undertaken by the private sector, the Philippine government has routinely assumed various risks by way of guarantees. These guarantees not only relate to core guarantees, such as foreign exchange and legal risks, but also to non-core guarantees associated with infrastructure projects, such as market and construction risks. This papers argues that the present practice of estimating, monitoring and accounting for government exposure and assumption of risk severely understates the true exposure and risk arising from the unfettered provision of guarantees. Alternative modalities for estimating exposure and risk are initially proposed, and these are drawn from applications in the financial sector. Nevertheless, further refinements in techniques and methods are needed.

This study estimates the individual responses of major Asian economies to an expansionary US mone... more This study estimates the individual responses of major Asian economies to an expansionary US monetary policy shock. The main result is that a US expansion leads to a real appreciation for several small, open Asian economies, with a negative impact on trade balances, eventually leading to a decline in GDP. The observed pattern of responses, where the trade balance plays a central role, is consistent with the Mundell-Fleming model. There is no evidence to support the existence of an interest rate channel in Asia, a central feature of new microfounded open economy macroeconomic models. A US expansion lowers real interest rates in the region, but Asian GDP, consumption and investment also generally fall.

Journal of international business research, 2008