ชั้น 2 ธนาคารแห่งประเทศไทย
Capital flows and the current account: Taking financing (more) seriously
This paper questions the appropriateness of popular analytical frameworks that focus on current accounts or net capital flows as a basis for assessing the pattern of cross-border capital flows, the degree of financial integration and the vulnerability of countries to financial crises. In the process, it revisits the Lucas paradox, the Feldstein-Horioka puzzle and the notion of sudden stops. It argues that, in a world of huge and free capital flows, the centrality of current accounts in international finance, and hence in academic and policy debates, should be reconsidered.
Observability and Endogenous Organizations
This paper establishes a relationship between the observability of common shocks and optimal organizational design in a multiagent moral hazard environment. We consider two types of organizations, namely relative-performace and cooperative regimes, and show that, with sufficient information regarding common shocks, a cooperative organization can be optimal even if outputs are highly correlated. The model is then embedded in a Walrasian general equilibrium model in which choices regarding organizations and investment in information on common shocks are jointly determined. Numerical results reveal that both cooperative and relative-performance regimes can coexist in equilibrium but only cooperative organizations invest in full observability of common shocks. Changes in the cost of information and aggregate wealth can affect substantially the types of organizations operating and the matching patterns of heterogeneous agents in these organizations. General equilibrium effects are key in determining how information costs impact the way production is organized.
Gauging Households’ Debt Tolerance: Evidence from Thailand
Understanding households’ debt tolerance has direct implications on policies addressing high household debt in many Asian economies. This study examines the determinants of debt tolerance and assesses the tolerance level among different household segments. It defines the debt tolerance as the ability to cope with debt without suffering from anxiety and provides empirical evidence based on a survey on Thai households in 2013. Using the IV probit model, the findings indicate that factors important to the debt tolerance include not only debt burden and financial cushion but also income security, financial history, and financial discipline. This suggests that addressing the debt tolerance issue requires a multi-faceted approach. It also highlights the relatively low debt tolerance among households in precarious jobs including farmers, general workers and business owners. The results are robust to a number of alternative specifications.
Thai Inflation Dynamics in a Globalized Economy
This paper investigates whether the observed changes in Thai inflation dynamics since the 1990s can be attributed to the process of globalization. First, this paper develops a dynamic factor model to extract a global component from underlying inflation rate movements in Thailand and its top trading partners. Based on the empirical findings, the importance of the global factor for Thailand doubled since 2001, emphasizing the growing role of globalization since then. Second, to explore the economic determinants behind the global factor, this paper estimates an unobserved components model for Thai inflation that is consistent with an Open Economy New Keynesian Phillips curve (OE-NKPC). The empirical model incorporates structural breaks to examine how the influences of domestic and global output gaps for Thai inflation changes over time. Based on the findings, long-term inflation expectations declined significantly and became well anchored at an average level of 2.4 percent shortly after the Bank of Thailand adopted an explicit inflation target in 2000. At the same time, short-run inflation movements became increasingly driven by a global rather domestic output gap. Based on an extended OE-NKPC, the global output gap still remains important beyond the direct import price channel during the 2001-2007 period. However, after the global financial crisis, the global output gap only serves to capture the direct effects of world oil price movements on inflation.
Index-based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Countries
This paper explores innovations in index-based risk transfer products (IBRTPs) as a means to address important insurance market imperfections that have precluded the emergence and sustainability of formal insurance markets in developing countries, where uninsured natural disaster risk remains a leading impediment of economic development. Using a combination of disaggregated nationwide weather, remote sensing and household livelihood data commonly available in developing countries, the paper provides analytical framework and empirical illustrations on how to design nationwide and scalable IBRTP contracts, to analyse hedging effectiveness and welfare impacts at the micro level and to explore cost effective risk-financing options. Thai rice production is used in our analysis with the goal of extending the methodology and implications so as to enhance the development of national and regional disaster risk management in Asia.
Monetary Policy and Financial Spillovers: Losing Traction?
Has financial globalisation compromised central banks’ ability to manage domestic financial conditions? This paper tackles this question by studying the dynamics of bond yields encompassing 31 advanced and emerging market economies. To gauge the extent to which external financial conditions complicate the conduct of monetary policy, we isolate a “contagion” component by focusing on comovements in measures of bond return risk premia that are unrelated to economic fundamentals. Our contagion measure is designed to more accurately capture spillovers driven by exogenous global shifts in risk preference or appetite. The analysis reaches several conclusions that run counter to popular presumptions based on comovements in bond yields. In particular, emerging market economies appear to be much less susceptible to global contagion than advanced economies, and the overall sensitivities to contagion have not increased post-crisis.
Globalization and International Inflation Dynamics: The Role of the Global Output Gap
Globalization has been suggested to increase the sensitivity of domestic inflation to global economic conditions. This paper develops an unobserved components model that is consistent with an open economy New Keynesian Phillips curve (NKPC), and finds that a global output gap has replaced the domestic output gap as the key driving variable for inflation in 17 advanced and emerging countries, particularly since the year 2000. The cross country analysis also suggests that the influence of the global output gap for national price movements is positively correlated to a country’s degree of openness in trade. Upon the inclusion of import and oil prices to the NKPC specification, the global output gap remains a significant driving variable for inflation, suggesting that the global output gap matters for inflation beyond the traditional import price channel.
Monetary Policy Transmission in Emerging Asia: The Role of Banks and the Effects of Financial Globalization
Given the heavy reliance on bank lending as the main source of financing in most Asian economies, banks could potentially play a pivotal role in monetary policy transmission. However, we find that Asia’s bank lending channel or, more broadly, credit channel of domestic monetary policy is not very strong at the aggregate level. Using bank-level data for nine Asian economies during 2000–2013, we show that heterogeneity of bank characteristics (e.g., ownership type, financial position), degree of foreign bank penetration of the domestic banking sector, and global financial conditions all have a bearing on the response of domestic credit to changes in domestic monetary policy, and may account for the apparently weak credit channel at aggregate level.
Intertwining Inequality and Labor Market under the New Normal
This paper builds on a life cycle model of occupational choices and financial frictions to understand the main channel through which demography and inequality influence the economy. Based on household data from Thailand, younger cohorts are likely to be workers and older cohorts are likely to be entrepreneurs due to age-dependent skills and asset accumulation. Under the new normal faced by the Thai economy as well as others, aging population can lower overall total factor productivity and increase inequality. An increase in equilibrium wage due to shortage of labor supply drives mediocre entrepreneurs to become self-employed – a low-income and low-productivity occupation – and worsens total factor productivity and hence inequality. Moreover, a decline in world interest rates associated with global aging population will exacerbate this negative effect. Reducing financial frictions or alleviating a borrowing constraint of talented entrepreneurs can mitigate this effect while extending retirement age will only improve output per capita while total factor productivity and inequality worsen.
Rethinking Potential Output: Embedding Information about the Financial Cycle
This paper argues that information about the financial cycle should be incorporated in measures of potential output. Identifying potential output with non-inflationary output is too restrictive given that growing financial imbalances can place output on an unsustainable path even if inflation is low and stable. We propose a simple and transparent framework to accommodate information about the financial cycle in constructing output gap estimates. Applied to US data, our approach yields measures of potential output that are not only estimated more precisely, but also much more robust in real time. Inflation, by comparison, carries very little information that can be exploited to infer potential output.
Extracting Market Inflation Expectations: A Semi-structural Macro-finance Term Structure Model
This paper estimates the term structure of inflation expectations using a semi-structural macro-finance term structure model based on new Keynesian macroeconomic framework and the arbitrage-free affine term structure model which defines bond prices as an affine function of state variables. Key economic variables and Thai government bond yield curve data are used to filter out for unobserved components. While letting the inflation target adapts over time, the results suggest that the inflation target has trended down under inflation targeting regime. The long-term inflation expectation is well anchored while the inflation risk premium has dropped substantially over the past five years. The real interest rate is considerably volatile and is a major contributor to movements in the 10-year government bond yield.
Inflation expectations and monetary policy in Thailand
This paper examines the relationship between inflation expectations and monetary policy in Thailand. The forward-looking Taylor rule is applied to measure monetary policy actions. Inflation expectations extracted from the yield curves are used. Our results provide two key findings. First, we find econometric evidence that inflation expectations react to monetary policy actions. A tighter monetary policy can curb expected inflation not only for short-term expectations but also for long-term expectations. These results are valid for both the reducedform single-equation and the structural-form system-of-equations estimation. Second, the monetary policy stance as measured by the residuals from the forward-looking Taylor rule is able to capture the relationship between monetary policy and inflation expectations better than the outcome-based policy rule. These results may explain the weak evidence in previous studies of the relationship between inflation expectation and monetary policy.
Extreme Linkages in Financial Markets: Macro Shocks and Systemic Risk
The recent IMF World Economic Outlook (2013) investigates how real and ﬁnancial shocks can cause a sharp increase in cross country output co-movements. This paper looks at the reverse issue by asking how macro regimes of extreme low and high inﬂation or productivity growth are conducive to spillover of ﬁnancial market shocks between major open economies. Using a non-parametric measure we study the largest movements in the US and German equity index returns conditional on a speciﬁc macro regime in one or both of the countries. It is known that the unconditional probability of diﬀerent stock markets crashing jointly is non-negligible, see e.g. Hartmann et al. (2004) and Poon et al. (2004). The results suggest that the factor related to real economy, i.e. industrial production growth, is a major driver behind the extreme loss linkage, but inﬂation is not. One explanation is that monetary policy shocks are absorbed by the exchange rate, whereas technology shocks do spillover.
Stability of Thai Baht: Tales from the Tails
We demonstrate how the EVT-based signalling approach for currency crises can be applied to an individual country with a small sample size. Using Thai historical data, first, we study the tail characteristics of the distributions of two Thai baht instability measures and 21 economic fundamentals. Then, we test asymptotic dependence between the currency instability measures and lagged economic fundamentals. Empirically, we find that the distributions of both currency instability measures and economic variables are heavy tailed. Assuming a normal distribution for the variables tends to underestimate the probability of extreme events. Furthermore, most of the economic variables which are usually used as signalling indicators for currency crises are asymptotically independent of the currency instability measures. Signals issued by these variables are thus not reliable. Nevertheless, the non-parametric EVT approach facilitates the selection of economic indicators with credible signals and high crisis prediction success.