Shang-Jin Wei's research while affiliated with Columbia University and other places
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Publications (250)
With capital controls, the standard financial market transactions needed for currency carry trade are hard to implement. Using detailed trade data reported by both the mainland Chinese and Hong Kong’s governments, we present evidence that indirect currency carry trade likely takes place via round-trip reimports. We also show that greater state cont...
A flurry of recent regional economic agreements in the Pacific are best characterized as ‘semi-inclusive,’ as each tends to include some large economies in the region but omit some others. With a perspective from global value chains (GVCs), we assess two particular dimensions of these agreements: (a) reduction in trade barriers, and (b) promotion o...
An influential hypothesis states that export pioneers are too few relative to social optimum because the first exporter’s action creates an informational public good for all subsequent exporters. The hypothesis has been invoked to justify certain types of government interventions. We note, however, that such market failure requires two inequalities...
Standard models of capital flows to emerging market economies focus on debt flows and a pecuniary externality. However, by offering better risk sharing, international equity flows can render such externality unimportant, yet many economies fail to attract equity investment in a large quantity. We propose a theory of endogenous composition of capita...
This paper examines the relation between productivity and specialisation of firms in business functions. We distinguish between specialisation in R&D, fabrication and marketing based on the firm's employment composition over these functions using unique survey data of Dutch firms. Our results suggest that firms specialised in R&D and marketing are...
The logic of the ‘smile curve’ in the context of global value chains (GVCs) has been widely used in case studies of individual firms, but rarely identified at the country‐industry level by using real data. This paper puts forward a proposal, based on an inter‐country input–output model, to consistently measure both the gain of value added and the p...
This paper investigates whether and how unconventional interventions in 2008–2010 unfroze the credit market. We construct a dataset of 198 interventions for 16 countries during 2008–2010 and examine heterogeneous responses in stock prices to the interventions across 7,873 nonfinancial firms in those countries. Stock prices increase when the interve...
We study the implications of global supply chains for the design of monetary policy, using a small-open economy New Keynesian model with multiple stages of production. Within the family of simple monetary policy rules with commitment, a rule that targets separate producer price inflation at different production stages, in addition to output gap and...
The real effective exchange rate (REER) is one of the most cited statistics in open‐economy macroeconomics. We show that the models used to compute these numbers are not rich enough to allow for the rising importance of global value chains. Moreover, because different sectors within a country participate in international production sharing at diffe...
This paper empirically investigates the relationship between household porfolio choices and wealth distribution with micro-survey data in China. We show that due to decreasing relative risk aversion, the rich people tend to hold more complicated portfolios and own high-yield assets of stocks, housing and private businesses. As a result, the return...
We aim to make two contributions to the literature on the effects of transaction costs on financial price volatility. First, by augmenting a double differencing approach with a research design with three ingredients (a common set of companies simultaneously listed on two stock exchanges, binding capital controls, and different timing of changes in...
This paper re-examines international transmissions of monetary policy shocks from advanced economies to emerging market economies. In terms of methodologies, it combines three novel features. First, it separates co-movement in monetary policies due to common shocks from spillovers of monetary policies from advanced to peripheral economies. Second,...
When a sovereign faces the risk of debt default, it attempts to expropriate the private sector. But the likelihood of a transfer from the sovereign risk to corporate default risk can be mitigated by legal institutions that provide strong property rights protection. Using a novel credit default swaps (CDSs) dataset covering both government and corpo...
This paper empirically investigates the various effects that source and destination countries’ financial development (SFD and DFD respectively) have on foreign direct investment (FDI). We establish causality by exploiting variations in both country-specific financial development and sector-specific financial vulnerability. This approach is made pos...
After more than three decades of high growth based on its low-wage advantage and relatively favorable demographics--in combination with market-oriented reforms and openness to the world economy--China is at a crossroads with a much higher wage and a shrinking workforce. Future growth will depend, by necessity, more on the generation of increased pr...
Do middle-income countries face difficult challenges producing consistent growth? Using transition matrix analysis, we can easily reject any unconditional notion of a “middle-income trap” in the data. However, countries have different fundamentals and policies. Using a non-parametric classification technique, we search for variables that separate f...
In this paper, we explore the implications of home ownership as a status good for housing prices. More concretely, if a family's housing wealth relative to others is an important sorting variable for relative attractiveness in the marriage market, then competition for marriage partners might motivate people to pursue a bigger and more expensive hou...
This study investigates whether foreign institutional investors can enhance shareholder value in emerging markets. We pay special attention to two dimensions of investor heterogeneity: whether investors declare themselves to be activists, and whether activists come from countries with strong traditions of investor activism (identified by the incide...
This paper investigates the effects that external financing conditions in source and destination countries have on foreign direct investment (FDI) in normal and crisis times, using a difference-indifferences approach. We find that source and destination countries’ financial development have a strong positive impact on the relative volume of FDI in...
This paper has been updated two times, a new version can be found here
https://doi.org/10.1111/obes.12364
Bo Meng, Ming Ye, Shang-Jin Wei (2020). Measuring Smile Curves in global value chains. Oxford Bulletin of Economics and Statistics.
https://doi.org/10.1016/j.strueco.2021.10.007
Bo Meng and Ming Ye (2021). Smile Curves in Global Value Chains:...
If a non-financial firm does not do well in a financial crisis, it could be attributable to either a contraction of demand for its output, or to a contraction of supply of external finance. Disentangling finance and demand shocks is difficult in the aggregate as they are observationally equivalent. They also feed on each other as a crisis unfolds....
When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason for why international investment in private companies has to take into account the sovereign risk. But the likelihood of a transfer from the sovereign risk to corporate default risks may be mitigated by legal institutions tha...
Motivated by recent empirical work, this paper formalizes a theory of competitive savings - an arms race in household savings for mating competition that is made more fierce by an increase in the male-to-female ratio in the pre-marital cohort. Relative to the empirical work, the theory can clarify a number of important questions: What determines th...
This paper proposes a framework for gross exports accounting that breaks up a country’s gross exports into various value-added components by source and additional double counted terms. By identifying which parts of the official trade data are double counted and the sources of the double counting, it bridges official trade (in gross value terms) and...
For many questions, it is crucial to know the extent of domestic value added (DVA) in a country's exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By applying our framework to Chinese data, we estimate that the share...
We explore the effects of a country’s financial structure on its corporate savings and current accounts. Specifically, we investigate whether a financial system that relies relatively more on banks and less on the capital market presents more difficulties for access to financing by small and medium sized firms. As a result, firms in these countries...
While in standard housing economics housing is regarded as an asset and a consumption good, we study in this paper the consequences for housing prices if housing is also a status good. More concretely, if a family’s housing wealth relative to others is an important marker for relative status in the marriage market, then competition for marriage par...
When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason for why international investment in private companies has to take into account the sovereign risk. But the likelihood of a transfer from the sovereign risk to corporate default risks may be mitigated by legal institutions tha...
Sticky (or slow-adjusting) current accounts are observed for many countries. This paper explores the role of domestic factor market flexibility in understanding the phenomenon. To do so, we consider multiple tradable sectors with different factor intensities and allow substitution between intertemporal trade (current account adjustment) and intra-t...
How does increasing globalization affect corporate transparency? Freer trade represents different facets and in theory has ambiguous effects on corporate transparency. On the one hand, by exposing firms to more product market competition, it could discourage discretionary disclosure. On the other hand, by opening up foreign markets and enhancing fi...
No abstract available.
No abstract available.
This paper explores how reductions in tari¤s on imported inputs and …nal goods a¤ect …rm productivity by exploiting the special tari¤ treatment that processing …rms apply on imported inputs as opposed to those of non-processing …rms. Highly disaggregated Chinese transaction-level trade data and …rm-level production data from 2000 to 2006 are used t...
income inequality in China (Wei and Wu 2001). There are at least six reasons why the Chinese case may be interesting for researchers and policy-makers alike. Some of them have to do with the fact that China is a large and important country. However, equally if not more important reasons have to do with a methodological innovation: many problems sur...
This paper presents a new conceptual framework to measure sources of value-added trade by country in global production networks. With a parsimonious decomposition of gross exports that eliminates "double counting", it integrates all previous measures of vertical specialization and value-added trade in the literature. We apply the framework to the m...
Sticky (or slow-adjusting) current accounts are observed in many countries. This paper explores the role of domestic factor market flexibility in understanding the phenomenon. To do so, we consider multiple tradable sectors with different factor intensities and allow substitution between intertemporal trade (current account adjustment) and intra-te...
Using accounting data for 7722 non-financial firms in 42 countries, we examine how the 2007-2009 crisis affected firm performance and how various linkages propagated shocks across borders. We isolate and compare effects from changes in external financing conditions, domestic demand, and international trade on firms’ profits, sales and investment us...
The high and rising household savings rate in China is not easily reconciled with the traditional explanations that emphasize life cycle factors, the precautionary saving motive, financial development, or habit formation. This paper proposes a new competitive saving motive: as the sex ratio rises, Chinese parents with a son raise their savings in a...
A wave of trade liberalizations take place in both developing and developed countries, including China's WTO accession and the end of import quotas on textile and garment in the United States and Europe. At the same time, both China's current account surplus and the US deficit have risen to an unprecedented level. Are these developments related? We...
Developing countries traditionally experience pass-through of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors’ products, and the general CPI. But developing countries in the 1990s experienced a rapid downwar...
Export processing is an important part of international trade in developing countries. It accounts for over half of total exports in developing countries, such as Mexico and China. This type of trade involves multinational production relationships where foreign …rms can outsource to or integrate with the assembly plant. This paper exploits the coex...
We document evidence of corruption in Chinese state asset sales. These sales involved stakes in partially privatized firms, providing a benchmark – the price of publicly traded shares – to measure under-pricing. We document under-pricing of more than 70 percent, which is correlated with deal attributes associated with misgovernance and corruption....
This empirical paper is concerned with the determination of business cycle synchronization. I focus in particular on the role of monetary regimes. Inflation targeting seems to have a small but positive effect on the synchronization of business cycles; countries that target inflation seem to have cycles that move more closely with foreign cycles. Mo...
The rise of the People's Republic of China (PRC) in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of foreign value-added (FVA) in exports. This chapter reviews a general formula in Koopman et al. (2008) for computing domestic and foreign contents when processing exp...
China experiences an increasingly severe relative surplus of men in the pre-marital age cohort. The existing literature on its consequences focuses mostly on negative aspects such as crime. In this paper, we provide evidence that the imbalance may also stimulate economic growth by inducing more entrepreneurship and hard work. First, new domestic pr...
Though the real exchange rate is a key price for most economies, our understanding of its determinants is still incomplete. This paper studies the implications of status competition in the marriage market for the real exchange rate. In theory, a rise in the sex ratio (increasing relative surplus of men) can generate a decline in the real exchange r...
When the credit market was frozen in spite of a low nominal interest rate during the 2008-2010 global financial crisis, many governments undertook a set of unconventional measures, such as debt guarantee, bank recapitalization, and purchase of bank toxic assets. Did these unconventional interventions achieve their intended policy objective of unfre...
This chapter reports estimates of foreign value-added (FVA) in Mexico’s manufacturing exports that takes into account the high import content of production in the Maquiladora and PITEX programs, using a methodology developed in Koopman, Wang, and Wei (2008). This is the first study for Mexico that measures vertical specialization using a recently a...
In understanding the sources of China's growth success, one theory is that the Chinese government's active and successful promotion of industrial upgrading, rather than passively waiting for market-determined natural evolution of its comparative advantage, is a key for its sustained high growth rates. One possible market failure that could justify...
China’s high corporate savings rate is commonly claimed to be a key driver for the country’s large current account surplus. The mainstream explanation for high corporate savings is a combination of windfall profits in state-owned firms, especially in resource sectors, and mis-governance of state-owned firms represented by their low dividend payout....
This paper provides both a conceptual framework for decomposing a country’s gross exports into value-added components by source and a new bilateral database on value-added trade. Our parsimonious framework integrates all previous measures of vertical specialization and value-added trade in the literature. To illustrate the potential of the decompos...
This article studies whether the volume and composition of capital flows affect the degree of credit crunch during the 2007–2009
crisis. Using data on 3,823 firms in 24 emerging countries, we find that, on average, the decline in stock prices was more
severe for firms that are intrinsically more dependent on external finance for working capital. In...
Fighting global financial crises is a primary charge of the IMF. Yet it has often been criticized to have hindered rather than helped the recovery of many countries in a crisis by demanding policy changes that may not be appropriate for them in that particular moment. Such actions would tend to damage investor confidence. Using monthly data on inve...
Large savings and current account surpluses by China and other countries are said to be a contributor to the global current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings based on a major, albeit insufficiently recognized by macroeconomists, transformation in many of these socie...
Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had trade reform conditions in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective...
The paper presents a robust but previously undocumented data pattern: corporate risk taking is positively correlated with country-level foreign exchange reserve holdings (as a share of the GDP). With data on 5000 manufacturing firms in 24 emerging economies during 2000-2006, we show that foreign reserve accumulation is economically and statisticall...
While openness to trade is a well-recognized hallmark of the Asian growth model, another component of the model is a leapfrogging strategy—the use of policies to guide industrial structural transformation ahead of a country's factor endowment. Does the leapfrogging strategy work? Opinions vary but the evidence is scarce in part because it is more d...
In less than three decades, China has grown from playing a negligible role in world trade to being one of the world's largest exporters, a substantial importer of raw materials, intermediate outputs, and other goods, and both a recipient and source of foreign investment. Not surprisingly, China's economic dynamism has generated considerable attenti...
This paper provides firm-level evidence that credit constraints restrict international trade flows and affect the pattern of foreign direct investment. Using detailed data from China, we show that foreign-owned affiliates and joint ventures have better export performance than private domestic firms, and that this advantage is systematically greater...
We examine the relationship between the rapid pace of trade and financial globalization and the rise in income inequality observed in most countries over the past two decades. Us-ing a panel of 51 countries over a 23 year period from 1981-2003, we find that technological progress has had a greater impact than globalization on inequality. The limite...
This paper studies the value of external commitment to policy reforms in the case of WTO/GATT accessions. The accessions often entail reforms that go beyond narrowly defined trade liberalization, and have to overcome fierce resistance in the acceding countries, as reflected in protracted negotiations. We study the growth and investment consequences...
The high and rising household savings rate in China is not easily reconciled with the traditional explanations that emphasize life cycle factors, the precautionary saving motive, financial development, or habit formation. This paper proposes a new competitive saving motive: as the sex ratio rises, Chinese parents with a son raise their savings in a...
This paper proposes a simple framework (a) to quantify the importance of the finance shock to non-financial firms in 45 countries by exploring cross-firm heterogeneity in dependence on external finance for working capital and investment, and (b) to study whether and how the type of financial system, the nature of monetary and exchange rate regime,...
Over the last three decades, the value of Chinese trade has approximately doubled every four years. This rapid growth has transformed the country from a negligible player in world trade to the world's second largest exporter, as well as a substantial importer of raw materials, intermediate inputs, and other goods. This paper provides an overview of...
The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies that have made it possible to trade in some business and computing services that were previously considered non-tradable. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000...
This paper studies the joint impact of corruption on the entry mode and volume of inward foreign direct investment (FDI) using a unique firm-level data set. We find that corruption not only reduces inward FDI, but also shifts the ownership structure towards joint ventures. The latter finding supports the view that corruption increases the value of...
Over the last three decades, the value of Chinese trade has approximately doubled every four years. This rapid growth has transformed the country from a negligible player in world trade to the world's second largest exporter, as well as a substantial importer of raw materials, intermediate inputs, and other goods. This paper provides an overview of...
The assertion that a flexible exchange rate regime would facilitate current account adjustment is often repeated in policy circles. In this paper, we compile a data set encompassing data for over 170 countries over the 1971-2005 period, and examine whether the rate of current account reversion depends upon the de facto degree of exchange rate fixit...
Die Konjunktur in Deutschland hat sich stabilisiert. Die Produktion im zweiten Quartal 2009 verlief �berraschend positiv. Im dritten Quartal d�rfte sie deutlich angezogen haben. Alles in allem revidieren wir unsere Prognose f�r das Jahr 2009 nach oben. Wir rechnen nun mit einem R�ckgang des realen Bruttoinlandsprodukts um 4,9 Prozent (Prognose vom...
The rise of the People’s Republic of China (PRC) in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of foreign value added (FVA) in exports. We review a general formula in Koopman, Wang and Wei (2008) for computing domestic and foreign contents when processing exports...
This paper studies the impact of corruption in emerging markets on the mode of entry and volume of inward foreign direct investment using a unique firm-level data set. It examines two effects of corruption simultaneously: a reduction in the volume of foreign investment and a shift in the ownership structure. Corruption makes local bureaucracy less...
Citations
... Between 6 March and 18 March 2020, the index fell by almost 15% [6]. Government interventions, such as the implementation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the U.S., helped stabilize financial markets and the economy [7,8]. In Latin America, countries usually tend to lack the financial resources that might help lessen the impacts of the pandemic on financial markets and their economies, which can lead to further reductions in capital investments and economic growth [9,10]. ...
... 11 For example, Engel & Park (2018) show that temptation for local government to deflate the LCD would make the LCD more expensive than the FCD in equilibrium. Ma & Wei (2020) show that poor institutional quality makes the international investors suffer more expropriation risk when holding LCD, which also makes it more expensive. ...
Reference: Sudden Stop with Local Currency Debt
![[object Object]](https://i1.rgstatic.net/ii/profile.image/788373736275974-1564974354226_Q64/Chang-Ma.jpg)
... In our calculation, we assume that the life span of those who passed away before age 5 had a life span of 2 years and those who passed away between the ages of 6 and 14 had a life span of 9. Given the death rate for those who passed away under age 5 x, and the death rate for those passed away between the ages of 6 and 14 y, and assume the life span of those born at a particular year to be l, then the life span of those who survived to age 15, z, is the solution to 2*x+9*(1-x)*y+(1-x)*(1-y)*z=1. 5 ...
Reference: Working paper
... While most of the literature on value creation in GVCs is conceptually grounded on functions and functional specialization (e.g., R&D, design, production, logistic), IO approaches "mingle functional specialization with specialization by industries" (Stöllinger, 2021;p. 96) and the measurement of industry upstreamness largely fails to detect (or reflect) functions and value chain stages, or what firms actually do within the GVC (De Vries et al. 2021). ...
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... As in the wake of the GFC, policymakers must also consider the externalities of their actions, both in terms of public health and economic policies. There is a call for international coordination to cushion the economic downturn and restart the world economy (Berglöf andFarrar. 2020, Group of Concerned Economists 2020). ...
... As we said, initially studies on GVCs mainly used case studies, exploring the governance relationship between lead firms and their suppliers, based on the observation that specific actors are more important than market exchanges in coordinating activities (Gereffi et al., 2005). Over time, the focus moved to more quantitative analyses to identify the value-added in each stage (Athukorala, 2010), and trade-in-value-added indicators based on input-output (IO) data were developed (Antràs et al., 2012;Meng et al., 2020;Timmer et al., 2015). Common to the different approaches is the recognition of strong industrial specificities and the need to integrate qualitative and quantitative analysis on specific industries (UNCTAD, 2020; Lema et al., 2021). ...