The earnings-price ratio (E/P ratio) of the Hang Seng Index (HSI) and the spreads between the E/P ratio and interest rates are widely used by market practitioners to forecast the stock market outlook. This paper studies their usefulness as indicators of future Hong Kong stock market conditions....

It has often been argued that East Asia needs to switch from an export-led growth model to a domestic-demand led growth model so as to reduce its vulnerability to a sharp slowdown in the US economy. This paper argues that, indeed, in the foreseeable future, East Asia's business cycle is unlikely...

In this paper we show that monetary policy frameworks in the East Asia and Pacific region are heterogeneous, with exchange rate policies being subordinate to domestic price stability objectives in most regional economies. We then argue that in this environment it is undesirable to focus regional...

Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks, in particular US-dollar funding shortages, prompting central banks around the world to adopt unprecedented policy...

Between the fourth quarter of 2008 and the end of 2009, the strong-side Convertibility Undertaking was triggered repeatedly with remarkable capital inflows into the Hong Kong dollar. In view of this development, this paper proposes an analytical framework to understand the relationship between a...

It is typically argued that China's food-price inflation has been mainly driven by supply-side shocks including natural disasters. Our research, however, shows that demand pressures have played a more important role from a medium-term perspective. This suggests surging food prices may call for...

When US dollar interbank markets malfunctioned during the global financial crisis of 2008, many non-US financial institutions relied heavily on the foreign-exchange (FX) swap markets for US-dollar funds. This one-sided market induced a risk premium of the FX swap-implied US-dollar rate across a...

In portfolio and risk management, estimating and forecasting the volatilities and correlations of asset returns plays an important role. Recently, interest in the estimation of the covariance matrix of large dimensional portfolios has increased. Using a portfolio of 63 assets covering stocks,...

In macro surveillance work, we often find it difficult to assess the state of the Mainland economy based on unadjusted monthly or quarterly data as the underlying economic trends are obscured by seasonal variations and the effect of moving holidays. Standard procedures exist for seasonal...

This paper studies the effects of the fiscal-stimulus package in Mainland China on its output and employment. Using the input-output table as the analytical framework, we argue that the aggregate effect on output and employment of a given amount of fiscal spending depends on the distribution of...