สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์

ผลงานวิจัยฉบับเต็มโดยนักวิจัยของสถาบันและนักวิชาการภายนอก

THE INCOME AND CONSUMPTION EFFECTS OF COVID-19 AND THE ROLE OF PUBLIC POLICY

by

Suphanit Piyapromdee and Peter Spittal

FINANCIAL MARKETS

No. 138
27 พฤษภาคม 2563

Cash flow uncertainty and IPO underpricing: Evidence from Thai REITs

Kanis Saengchote and Chittisa Charoenpanich

abstract

REIT IPOs in Thailand are less underpriced than stock IPOs (2.45% compared to 23.0%), which is a common finding across many international markets (Chan, Chen and Wang, 2013). One of the most common explanations for IPO underpricing is adverse selection arising from information asymmetry. However, research in IPO tends not to investigate this issue directly due to the difficulty in estimating ex-ante uncertainty. REITs provide a unique research setting because some REITs enjoy income guarantee, which can reduce cash flow uncertainty. We find that REITs with income guarantee are much less underpriced on average, corroborating the linkage between cash flow uncertainty and IPO underpricing. We confirm that REITs with income guarantee tend to have lower systematic risk (measured by CAPM beta) and returns, making the nature of some REITs more debt-like than equity-like.

No. 135
5 พฤษภาคม 2563

Delinquency Priority in Consumer Credit: Evidence from Thai Microdata

abstract

This study examines the question of how consumer prioritize default across products. We find that about a third of Thai individuals who face default decisions on mortgage and non-mortgage loans choose to default on mortgage loans first. As predicted by theory, their decisions are influenced by relative debt burden and amount of housing equity, consistent with both the ability to pay and the willingness to pay channels. We also find a puzzling result that borrowers who hold older mortgage loans are more likely to default on their mortgages; we hypothesize that this is perhaps related to refinancing.

No. 131
16 เมษายน 2563

Mutual Fund Participation in IPOs: Thai Evidence

abstract

Underwriters and co-managers play an important role in IPOs, but because they often have affiliated mutual funds, concerns about conflicts of interest can arise. On the one hand, they can use this affiliation for the benefit of their asset management business (the information advantage hypothesis); on the other hand, they can use mutual funds under their control to support their IPO clients (the quid pro quo hypothesis). In this article, we find that the behavior of lead underwriter-affiliated funds in Thailand is more consistent with the information advantage hypothesis and co-manager-affiliated funds more consistent with the quid pro quo hypothesis. We also find further evidence of strategic placement of IPO stocks within fund family.

No. 130
14 เมษายน 2563

Uncertainty and Economic Activity: Does it Matter for Thailand?

abstract

This paper investigates the role of domestic and foreign uncertainty shocks for macroeconomic dynamics in Thailand. We construct and compare various indicators of economic and policy uncertainty, including macroeconomic and financial uncertainty, as well as monetary policy, fiscal policy, and political uncertainty. We find that while all uncertainty measures display countercyclical behavior, they generate heterogenous effects on real GDP and its components depending on the type of shock. In general, the magnitude of real activity decline in response to economic and policy uncertainty shocks are on the scale of 1-2 percent, with most of the transmission occurring through investment and trade flows rather than consumption demand. In terms of persistence, Thai macroeconomic uncertainty shocks generate sudden impacts, while the effect of other shocks on the economy are more gradual. Despite being a small open economy, we find that domestic uncertainty shocks can be as prominent as uncertainty shocks that spillover from abroad. Thai monetary policy shocks generate declines in real activity that are as large and persistent as US financial uncertainty shocks, whereas the impact of both Thai fiscal policy uncertainty and US economic policy are both rather short-lived. Furthermore, we find that uncertainty is a key driver of fluctuations in domestic output, with certain types of uncertainty being able to explain up to 40 percent of the variation in real activity, even in the long run. Finally, we observe asymmetry in the effects of downside versus upside economic uncertainty shocks, but no difference between uncertainty of short versus long horizons.

No. 121
24 ธันวาคม 2562

Words Matter: Effects of Semantic Similarity of Monetary Policy Committee’s Decision on Financial Market Volatility

abstract

The objective of the paper is to study the effects of semantic similarity of the Bank of Thailand’s press releases on volatility of financial markets in Thailand from 2010-2018. The Natural Language Processing (NLP) is employed to construct the semantic similarity from 72 press releases. The semantic similarity represents the public signal that the central bank delivers to the public in the framework of a Keynesian beauty contest game.

The semantic similarity of MPC press releases significantly reduce the volatility in 1-month, 3-month, 10-year and 15-year government debt securities. Findings imply that relatively similar language in the MPC press releases reduces the volatility in short-term and long-term bonds. Effects of semantic similarity matter most in the volatility of 10-year bond yield. However, effects of semantic similarity are insignificant in both equity and foreign exchange markets.

No. 120
24 ธันวาคม 2562

Gaining from Digital Disruption: the Thai Financial Landscape in the Digital Era

abstract

This paper examines competitiveness of the Thai financial sector through the dimensions of depth, access, efficiency, and stability, as compared to peers. The paper finds that while the Thai financial sector compares reasonably well with peers in most dimensions, it does not fare well in term of SME access to bank credit. Using Panzar-Rosse H-Statistic, the paper also examines competition in the Thai banking sector and finds that the level of competition in the Thai banking sector is consistently high over the sample period. The results raise the question: Why does SME access to bank credit remain low, despite high level of competition in the banking sector? This puzzle is important since SMEs are a key driver of the Thai economy. Reviewing results from various studies and interviews with SMEs and bank credit officers, the paper identifies several bottlenecks in the SME lending process that may lead to market failures. Using data from 1.29 million individual SME loan contracts obtained from 15 Thai commercial banks, and six Specialized Financial Institutions (SFIs), the paper finds that only a few banks attempt to penetrate SMEs at the lower tiers of loan size and income. Although SME lending by SFIs are found to be a good complement to SME lending by banks, the fact remains that fewer than half of SMEs in Thailand have loans from these financial institutions. The paper then discusses how several initiatives have been attempted to harness the power of technology and data to help improve SME access to finance, whether from traditional banks or other types of players. Lessons from the case of SME financing and from other segments of financial sectors in selected countries are then drawn into common themes that might help guide the design of financial landscape in the digital era.

No. 114
27 สิงหาคม 2562

Mapping Thailand’s Financial Landscape: A Perspective through Balance Sheet Linkages and Contagion

abstract

This paper conducts in-depth profiling of players and interlinkages in the Thai financial system based on sectoral balance sheet data and disaggregated supervisory data on banks and mutual funds. Several aspects of Thailand’s financial landscape have been documented. We find that financial interconnectedness has risen and become more complex, with the financial landscape increasingly tilted toward non-bank intermediaries. Network topology suggests a segmented landscape, with the presence of a core cluster where key players including households, firms, large domestic banks, and mutual funds of large banks’ asset management arms are located, indicating their tight interconnections. Leveraging on entity-level balance sheet profiles, we develop a stress-testing framework that is based on a network model of financial contagion. Two types of shocks are studied. For industry shocks, we find that losses generally propagate via the liability and ownership channel and the reverse liquidity channel. But when the losses are large enough, the fire-sale effects dominate. For bank reputational shocks, we simulate a loss of confidence in major banks via deposit withdrawal and fund redemption. While the overall losses are much smaller than those of industry shocks, these risks cannot be ignored since the mutual fund industry stands to suffer and panic selling could amplify the losses.

No. 113
20 สิงหาคม 2562

Should All Blockchain-Based Digital Assets Be Classified Under the Same Asset Class?

Voraprapa Nakavachara, Tanapong Potipiti and Thanawan Lertmongkolnam

abstract

The literature is well aware that blockchain-based digital assets would constitute a new asset class. However, it has been rather silent about the distinction among them. This paper discusses the digital tokens’ differences and similarities by their (i) creation and initial distribution; (ii) intended properties; (iii) actual usage; and (iv) behaviors. Although the digital tokens are indistinguishable in some aspects, they differ in the way they are created and initially distributed. Some of them have distinguishable risk and return profiles. Therefore, we take a view that the digital tokens take (or will take) different roles in the financial systems; should be classified under different asset classes; and should be subject to different sets of regulations (although some may overlap).

No. 109
29 พฤษภาคม 2562

The Impact of Regional Isolationism: Disentangling Real and Financial Factors

abstract

Recently, there is a pressure for isolation policies both within the United States and among the EU members. The pressure arises due not only to the difference between regions in the U.S. and/or countries in the EU, but also to the difference across their population which affect the gains and losses from economic integration, both real as from trade in a common market and financial as in a monetary financial union. To get a better understanding of this pressure, one would need a model of trade and capital flows that takes into account the difference between individuals in a region and differences across regions. There is also a need for detail data at the individual and aggregated level, which often are not available. In this paper, we use unique long-panel data of households in Thailand, and from these data, we construct the household financial accounts, the village economic accounts, and the village balance of payments account. We also provide stylized facts on factor prices, factor intensities, financial obstacles, and village openness document differences across regions. Finally at the national level it is clear there is co-mingled variation in trade via devaluations and in finance via policies toward off shore bank and within-country financial infrastructure.

We develop a heterogeneous-agent/occupational-choices/trade model with financial frictions carefully built up and calibrated around micro and regional facts, that is, at both the individual level and the aggregate level. Then, we conduct two counterfactual policy experiments. In the first counterfactual experiment, we distinguish the effects of trade from the effects of capital flows. More specifically, we determine what would happen if we allow the prices of goods to change as in baseline scenario while keep borrowing limits and interest rates constant, and vice versa. In the second counterfactual experiment, we determine the effect of isolation policies that impede trade and/or capital flows across regions. We find through these counterfactual experiments that both real and financial factors are at play, that there are differences across regions in impact even when (policy) movements in variables such as interest rates and relative prices, which are exogenous to the regions, are common; impacts can be large, and vary with policy; and impacts are significant heterogeneous with both gains and losses and non-monotone movement across wealth classes and occupations, even allowing for occupation shifts which apriori might have mitigated impact.

No. 104
31 มกราคม 2562

Foreign Exchange Order Flows and the Thai Exchange Rate Dynamics

abstract

Applying the microstructure approach to exchange rates, this paper aims to shed light on the price formation process in the Thai foreign exchange market using a unique supervisory dataset of daily foreign exchange transactions from all licensed dealers in Thailand. We examine the main drivers of different types of order flows and the effect of resident and non-resident customer order flows on the Thai exchange rate. The results suggest that non-resident order flows have an important influence on movements in the Thai baht, while resident order flows do not. Regarding investors’ trading behavior, we find that non-resident order flows are driven by both fundamentals and movements of the Thai baht. Specifically, non-resident players appear to be ‘trend-followers’ with regard to exchange rate returns, exerting buying pressure when the baht recently appreciated. In contrast, domestic players tend to behave as ‘contrarians’, by buying the Thai baht after it depreciates.