Investors' attitude towards risk is a key factor driving the movement in asset prices. Global reduction in investors' risk appetite has coincided with episodes of global financial market correction. In this paper, we derive a measure for risk appetite based on the methodology of Gai and Vause...

This paper applies a gravity model to investigate the determinants of foreign direct investment (FDI) in East Asia. We find that economic fundamentals (such as market size, per capita income, and country risk indicators), economic and cultural ties, and information asymmetry are important...

While Hong Kong's monetary policy is effectively tied to the US, its real economy has been experiencing increased integration with the Mainland through trade, Foreign Direct Investment (FDI), tourism, and increasingly financial flows. Co-movements of business cycles in Hong Kong and the Mainland...

Exchange-rate movement is regularly monitored by central banks for macroeconomic-analysis and market-surveillance purposes. Notwithstanding the pioneering study of Meese and Rogoff (1983), which shows the superiority of the random-walk model in out-of-sample exchange-rate forecast, there is some...

China's investment has been growing very strongly. The share of gross capital formation in GDP in China has also been higher than in other East Asian economies during their high growth period in the 1970s-80s. Many commentators have argued that such high rates of investment growth have been...

This paper studies the significance of Mainland-related shocks in determining Hong Kong money market interest rates after controlling for the influences of US variables. Analysis using a vector auto-regression model suggests that an unexpected rise in the Mainland policy interest rate, or a...

This paper extends the stationary-leverage-ratio model of credit risk measurement to incorporate a time-dependent target leverage ratio of a firm. The theoretical hypothesis of the existence of a time-dependent target leverage ratio reflects the movement of a firm's initial target ratio toward a...

Widespread financial distress typically arises from the unwinding of financial imbalances that build up disguised by benign economic conditions. This paper studies whether credit is a pertinent indicator of future equity price booms, and thus provides a signal for potential financial...

The features under the two-sided Convertibility Zone of the Hong Kong dollar resemble in many ways the target zone exchange rate regime in the literature. Following Tronzano et al. (2000), this paper utilises a Bayesian extension of the Svensson (1991) test, which takes into account the exchange...

Economic and financial developments on the Mainland have important implications for Hong Kong. This paper presents an empirical framework for assessing monetary and financial conditions on the Mainland by estimating a monetary conditions index (MCI). An MCI is usually defined as a weighted sum...