Tourism and the Services Sector Growth in Singapore
Within the context of a trivariate vector autoregressive framework that includes the degree of services sector openness, this article examines the link between tourism growth and services sector growth in Singapore. Empirical analysis based on Johansen's cointegration approach shows that the three variables are cointegrated (i.e., a stable long-run relationship exists among tourism growth, the degree of openness of the service sector, and services sector growth). The services and manufacturing sectors are regarded as the twin engines of Singapore's economic growth. It can be argued that tourism growth contributes to economic growth in Singapore through its impact on the services sector.
Interest Rate Pass-Through and the Asymmetric Relationship between the Cash Rate and the Mortgage Rate
There is an ongoing controversy over whether banks' mortgage rates rise more rapidly than they fall due to their asymmetric responses to changes in the cash rate. This paper examines the dynamic interplay between the cash rate and the standard variable mortgage rate using monthly data in the post-1989 era. Unlike previous Australian studies, our proposed threshold and asymmetric error-correction models account for both the amount and adjustment asymmetries. We found that the Reserve Bank of Australia's rate rises have a much larger and more instantaneous impact on the mortgage rate than rate cuts.
Downward stickiness of interest rates in the Australian credit card market
This paper measures the full extent of downward stickiness in credit card interest rates by testing for the amount and adjustment asymmetries. We found that lenders behave asymmetrically in response to changes in the Reserve Bank of Australia's (RBA) cash rate. The RBA's rate rises are passed on to borrowers much faster than rate cuts and the aggregate credit card interest rate showed a very resilient degree of downward rigidity. Overall, based on the estimated short-run dynamic model, banks immediately pass on 112% of any RBA's rate rises, but only 53.7% of any rate cut. In other words, the short-run effects of rate cuts were not only less than half of the rate rises but also were delayed on average by two months. As far as changes in the credit card interest rate are concerned, an expansionary monetary policy is thus less effective than a contractionary policy.
International outsourcing of skill intensive tasks and wage inequality
Within the context of a product variety model, this paper examines the impact of international outsourcing of some skill intensive tasks on wage inequality. We consider four possibilities: long-run equilibrium where varieties of producer services are non-traded, long-run equilibrium where varieties of producer services are traded, short-run equilibrium where varieties of producer services are non-traded and short-run equilibrium where varieties of producer services are traded. It is shown that in each case, under certain conditions, international outsourcing can increase skilled-unskilled wage inequality. In the first three cases, outsourcing affects wage inequality directly as well as indirectly. In the short-run equilibrium, where varieties of producer services are traded, international outsourcing increases skilled-unskilled wage inequality only through an indirect channel. In the short-run equilibrium, where all goods are traded, the impact of outsourcing on wage inequality depends solely on the relative size of the income share of capital. Furthermore, in the long-run equilibrium, outsourcing increases the productivity of the industrial sector.
Macroeconomic consequences of increased productivity in less developed economies
This paper examines the impact of improvements in productivity on prices, output, the real wage rate and the balance of payments. Within the context of the model used in this paper, an improvement in productivity can take two alternative forms: (1) a cost saving for a given output and (2) an increase in production without a direct decrease in employment. The results presented are based on a simple model of a small open economy that includes some key features of less developed economies. It is shown that, in the presence of monetary and fiscal restraints, an improvement in productivity leads to increases in output, employment and the real wage and the effect on the balance of payments, in the short and the medium runs, is also positive. We find that whether or not improvement in productivity is import saving plays a crucial role in both comparative static and simulation exercises.