Editor: James Bergin
If you have any inquires or comments related to the newsletter, please call Ms. Lily Yeung at (852)2788 8804
The Department organized (jointly with the Research Center for International Economics) an International Conference in Honor of Gregory Chow on China and the World Economy on June 14-16, 2002. The conference was co-organized by several other institutions and organizations. Professor Chow, Visiting Professor of City University of Hong Kong, was interviewed by Professor Bergin during the conference. The following is an excerpt of the interview.
Q: I guess the natural question is how you came to be in economics. What is the history? Why didn't you go into Physics or engineering? What brought you to economics?
A: Well, actually when I was in high school I was interested in physics and engineering. Growing up in China, modernization using science and technology was considered a national goal, so people were inspired to become physicists, engineers, technologists. In addition to that, I had a very good physics teacher in senior high school. So, I became interested in physics. When the time came for me to go to college, my mother told me that China needed a statesman because the government was in chaos - that China probably needed people in government, public service was more important than science. So, believe it or not I followed her advice. Actually, being in government is not the same thing as studying political science. I entered Lingnan University, Guangzhou, declaring myself as a major in political science or government in 1947. In China you had to start declaring a major before entering college. So, in the first year in Lingnan, I was a major of political science. Then I transferred to Cornell in my second year. When I applied to Cornell I told them that I wanted to be an engineer. They didn't accept me right away. They said why don't you study for a year and then come. In 1948 I showed up at Cornell as a sophomore. Cornell recognized all my credits from Lingnan. So I became a sophomore, and during sophomore year I took some economics courses - one of my teachers was Fred Kahn. There were some other good teachers also, so I got interested in economics.
Q: Why Cornell?
A: Oh, my brother advised me (he had returned from the US in 1946). I said I would like to study engineering and he mentioned three schools: MIT, Cornell and Purdue. So I tried to apply to these schools. Cornell wrote and was very encouraging, so somehow I got accepted there.
Q: You mentioned Guangzhou. You grew up in the Canton part of China?
A: Yes, I grew up quite a bit in Guangzhou. In 1937 the Sino-Japanese war started and my family moved to Hong Kong. So I went to grade school in Hong Kong, until Pearl Harbor in 1941; and we stayed after Pearl Harbor under the Japanese occupation for a while, and then my family moved to Macau. Macau was neutral, so it was heaven during the Second World War. I went to junior high school and part of senior high school in Macau. Lingnan had a primary school in Hong Kong on Stubbs road. And then from there after Pearl Harbor it was closed and I went to Macau and then to Lingnan again. After 1945 we returned to Guangzhou. So, I finished high school in Lingnan.
Q: After Cornell did you go directly to Chicago?
A: Yes. Now, by the time I was in sophomore year I was interested in economics, but by junior year I was interested in econometrics. This was all of my own making. I was interested in quantitative methods. I still had an engineering-physics inclination, but in 1949 economists didn't even use calculus - most of them. I studied calculus, differential equations; for an economics major it was unusual. I got interested in econometrics on my own. I started reading Econometrica - although there was probably very few articles I could understand. I was very enthusiastic. Chicago was the only university which had a graduate course called econometrics in 1950.
Q: Did you like it there?
A: Oh, very very stimulating. I'd say it was great. From 1951 to 1955. I was certainly influenced by the so-called Chicago school. I believed in the free market, and when I left Chicago in 1955 my first teaching job was at MIT. But I still carried on the Chicago ideas. MIT is more liberal, in the American sense of the word. And, now looking back, I feel that I was very argumentative. I remember during the first academic year 55-56, I met Tinbergen. He was editor of a volume of contributions to economics. He was considering my dissertation for publication in that series so he invited me to have lunch at Harvard faculty club. In luncheon conversation he mentioned that in the mid 50's the United States had a lot of used cars but Europe needed automobiles. He said “wouldn't it be a good idea to ship some of the used cars from the US to Europe”. And my response was “If this was a good idea, someone would have done it”. The market would have taken care of it. And then Tinbergen looked at me and said, “Oh, it's just an idea”.
Q: I guess there was an influence from Coase. Coase was at Chicago - I guess he was a big player in Chicago when you were a student there?
A: Coase was an elder statesman - he provided the money, but not so much a scholar as an entrepreneur. So he was not a professor. The main people were Koopmans, Marschak .... Roy Radner was a fellow student; in fact Roy Radner and I got the degree the same year although he was older. He was doing research but he finished the same year. There was also Debreu and Houthakker - an assistant professor. Debreu was associate professor.
Q: Following the train of time, you went to MIT and I guess I have a recollection that you were at IBM for a period.
A: This is later. I think I should mention that my thesis adviser was Al Harberger. Al was associate professor while I was writing my thesis. This December, UCLA is celebrating his .... I don't know how many years of teaching. I'm going to attend the celebration at UCLA in December. He was few years ahead of me. And I retired officially last year. Whereas he is still full time teaching. That is Harberger for you. We had a nice group. Zvi Griliches was also in the group. I did my dissertation supported by his group on public finance. I wanted to mentioned this. You said something about MIT?
Q: In terms of the chronology of things I am thinking that you were working at IBM at some stage.
A: Oh yes. You see the fourth year when I was at MIT, my alma mater, Cornell offered me a tenured appointment. So I accepted it in 1959. After staying there for two and a half years I got a very attractive offer to go to the IBM research center at Yorktown Heights. And the person who invited me was Ralph Gomery who is now president of the Sloan foundation. At the time he had only a small group of fifteen to eighteen people reporting to him. IBM had a number of people who could do whatever research they liked; just like the Institute for Advanced Study, you could do whatever you want. You were chosen because IBM was interested in your area - whatever you did in your area was fine. It was a terrific environment; I accepted the IBM offer. I said I would come on leave for one year. But within two months I thought, “wow”, this is a much better deal. Professor on leave all the time. From 1962 to 1970, eight years I was working at IBM. I also taught econometrics at Columbia part time. I went down there once a week for an afternoon. Columbia didn't have a senior econometrician. So I was the senior econometrician in the sixties - until 1970 when I went to Princeton. Oskar Morgenstern retired so I took over the directorship of the econometric research program at Princeton.
Q: I guess at that stage you had enough of the business environment?
A: I didn't quite have enough. Actually, I didn't. Dick Quandt was chairman. He called me. He said Morgenstern was retiring and they were thinking of finding a replacement and asked if I would like to be considered. But people talked to me and said “now IBM is wonderful - like heaven, but you don't know how long the situation may last. In future your job may be different.” So, I think somehow, I went to Princeton partly because there was some uncertainty as to what the future at IBM might be like, although at that moment IBM was wonderful.
Q: That was your first contact with Princeton?
A: Yes. That was my first professional contact with Princeton.
Q: The hypothesis testing and that kind of thing was work that you thought about at IBM?
A: You mean the Chow test?
Q: Yes.
A: Oh the Chow test was earlier. The Chow test I thought about when I was an assistant professor at MIT. It was published in 1960. The paper was completed before the summer of 1959. I think in the spring of 1959.
Q: What were your interests? What were you working on at IBM?
A: I continued to work on econometrics. Essentially both theoretical and applied. In theoretical econometrics I did work on estimation of simultaneous equations; I worked on spectral methods; I started working on optimal control. In applied economics I did a classic paper on the demand for computers; I did macro - I had a well-known multiplier-accelerator model for the US economy which was used in textbooks. And I did work on the demand for money. So I did applied as well as theoretical econometrics.
Q: Two questions: What do you think are the big issues of the day? And, if you were just starting out and going to work in economics or econometrics, is there any topic you feel you would have to work on? What do you think is the most important thing right now?
A: I don't think I have an answer to that question. In my research on econometrics and dynamic optimization my book, Dynamic Economics, came out in 1997. I tried to advocate using the Lagrange method as compared with dynamic programming. I thought this is a more convenient way to do dynamics. Now that book represents probably much of what I have to say on economics problems because my interests since 1980 - for over two decades - have been on the Chinese economy. I have not been working on so called mainstream economics as much, although I keep up with it and what people are doing in current research. But I have not been looking at these fields and the really important problems ahead. I have not been thinking on this. My last book just came out two or three months ago - China's Economic Transformation. So, currently I have been more interested in the Chinese economy - how it operates etc., so this is an applied kind of thing. It is not a major methodological endeavor although in this context I have something to say about economic methodology. The relevance of institutional, cultural, historical factors in understanding economic transformation. And to what extent some of the ideas develop government - things like that.
In econometrics I don't think there are any “big issues”. I don't think people see ahead. Most econometricians are working on special areas. They are not opening a big front - they just work to move something ahead. I don't think that people think there are burning big issues in econometrics. For example, at one time statistical decision theory was considered a big step - these things don't come often.
Q: China is changing dramatically by any measure. Does the future look bright for China?
A: Definitely. I think it will be a leader in many ways. By 2020 total output of China will equal or exceed that of the United States. I think a lot of innovations will come out of it. It's not just a matter of measuring GDP. I think China will play an important role looking forward fifty years. Today, the Unites States is still the leader. But time will come when the Chinese universities are such that there are a lot of inventions there. I am thinking twenty to thirty years from now. Education is a slow process. But China will be a leader. There was a period for the British Empire. In the twentieth century it was the United States. Communism played a side role and now it is gone. I think that in the current century in China you can see innovative change in the way people look at the world.
Recent Research Outputs
A partial list of the recent output is provided below (with our staff names highlighted):
Articles in Academic Journals
Wu, Xueping (2002), “A Conditional Multifactor Analysis of Return Momentum”, Journal of Banking and Finance, Vol. 26, No. 8, pp. 1675-1696.
Zhang, Anming and Yimin Zhang (2002), “A Model of Air Cargo Liberalization: Passenger vs. All-cargo Carriers”, Transportation Research Part E, Vol. 38, pp. 175-191.
Stouraitis, Aristotelis (2002), “Acquisition Premiums When Investment Banks Invest Their Own Money in the Deals They Advise and When They Do Not: Evidence from Acquisitions of Assets in the UK”, Journal of Banking and Finance, forthcoming.
Kwok, S K Claudian (2001), “An Aggregate Model of Firm Specific Capital with and without Commitment”, Journal of Monetary Economics, Vol. 48, pp. 217-237.
Wang, Yong and A Tandon (2002), “Confidence in Domestic Money and Currency Substitution”, Economic Inquiry, forthcoming.
Li, Yuming (2001), “Expected Returns and Habit Persistence”, Review of Financial Studies, Vol. 14, pp. 861-899.
Baillie, R T, Y W Han and T G Kwon (2002), “Further Long Memory Properties of Inflationary Shocks”, Southern Economic Journal, Vol. 68, No. 3, pp. 496-510.
Chao, C C and Eden S H Yu (2002), “Immigration and Welfare for the Host Economy with Imperfect Competition”, Journal of Regional Science, Vol. 42, No. 2, pp. 327-338.
Wang, Yong and O Stark (2002), “Inducing Human Capital Formation: Migration as a Substitute for Subsidies”, Journal of Public Economics, Vol. 86, No. 1, pp. 29-46.
Kwan, Y K Fred and Edwin L C Lai (2002), “Intellectual Property Rights Protection and Endogenous Economic Growth?”, Journal of Economic Dynamics and Control, forthcoming.
Ching, T F Stephen, Clement Y P Wong and Anming Zhang (2002), “Non-tariff Barriers to Trade in the Pacific Rim”, Pacific Economic Review, forthcoming.
Chao, C C and Eden S H Yu (2002), “On Property Tax Coordination”, Journal of Real Estate Finance and Economics, Vol. 25, No. 1, pp. 67-69.
Li, Yuming and Dennis Capozza (2002), “Optimal Land Development Decisions”, Journal of Urban Economics, Vol. 51, pp. 123-142.
Zhang, Anming, Yimin Zhang and Ronald Zhao (2002), “Profitability and Productivity of Chinese Industrial Firms Measurement and Ownership Implications”, China Economic Review, Vol. 13, pp. 65-88.
Li, Yuming and Dennis Capozza (2001), “Residential Investment and Interest Rates: A Test of the Real Options Model of Development”, Real Estate Economics, Vol. 29, pp. 503-519.
Kaiser, K and Aristotelis Stouraitis (2001), “Reversing Corporate Diversification and the Use of the Proceeds from Asset Sales: The Case of Thorn EMI”, Financial Management, Vol. 30, No. 4, pp. 63-102.
Yu, S H Eden (2002), “Risk Management of Shanghai Enterprises with Financial Derivatives”, Journal of Applied Business Research, Vol. 18, No. 1, pp. 117-124.
Lai, L C Edwin and Larry D Qiu (2002), “The North Intellectual Property Rights Standard for the South?”, Journal of International Economics, forthcoming.
Kakkar, Vikas (2002), “The Relative Price of Nontraded-goods and Sectoral Total Factor Productivity: An Empirical Investigation”, Review of Economics and Statistics, forthcoming.
Clubb, C and Aristotelis Stouraitis (2002), “The Significance of Sell-off Profitability in Explaining the Market Reaction to Divestiture Announcements”, Journal of Banking and Finance, Vol. 26, No. 4, pp. 671-688.Conference Papers
Li, K W (2002), “China’s Capital and Productivity”, presented at the International Conference on China and the World Economy, Hong Kong, June 2002.
Li, Yuming (2002), “Consumption Habit and International Stock Returns”, presented at the 2002 European Finance Association Meetings, Berlin, Germany, 21-24 August 2002.
Wang, Yong and M Leung (2002), “Endogenizing Life Expectancy in a Growth Model with Health Care”, presented at the 17th Congress of the European Economic Association, Venice, Italy, August 2002.
Han, Y W (2002), “Long Memory Property and Central Bank Intervention in Foreign Exchange Market: The Case of Daily Korean Won-US Dollar Exchange Rate during the Currency Crisis”, presented at the conference on Korea and the World Economy, Seoul, Korea, 20-21 July 2002; and the seminar at Bank of Korea, Seoul, Korea, 24 July 2002.
Wu, Xueping, Piet Sercu and Jun Yao (2002), “Reexamining the Relation between Corporate Debt Mix and Growth in Japan”, presented at the 2001 EFA Annual Meeting, Barcelona, and the 2002 WFA Meeting, Utah, USA, 23-26 June, 2002.
Li, K W and Siegfried Bender (2002), “The Gain and Loss of Comparative Advantage in Manufactured Exports among Regions”, presented at the Annual APEC Study Center Consortium, Mexico, June 2002.
Ho, T M (2002), “Trade Elasticities of the Export Oriented Household Electrical Appliances Industry of Hong Kong”, presented at the 12th International Conference of International Trade and Finance Association, Bangkok, Thailand, 29 May-2 June, 2002.
Selected Working Papers (For a complete 2001 and 2002 working paper series no. 170-189, visit departmental website)
No. 170 Anderson, Kym and Shunli Yao (December 2001), “How can South Asia and Sub-Saharan Africa Gain from the Next WTO Round?”.
No. 177 Fisher Eric O’N and Vikas Kakkar (April 2002), “On the Evolution of Comparative Advantage in Matching Models”.
No. 178 Grossman Gene M and Edwin L C Lai (April 2002), “International Protection of Intellectual Property”.
No. 179 Baillie Richard T and Y W Han (May 2002), “Central Bank Intervention and Properties of the 1920s Currency Markets”.
No. 180 Kwok, Claudian S K (July 2002), “The Effects of a Credit Constrained Sector on Asset Pricing”.
If you would like to receive a copy of the Publications, please write to Ms. Lily Yeung, the Administrative Officer of the Department.
Announcements
New Appointments
We are pleased to welcome our new faculty members.
Prof. Yuming Li joined the department as a Visiting Professor in August 2002. Prof. Li received his B.Sc. in Applied Math from Shanghai Jiao Tong University, China, M.Sc. in Management Science from University of British Columbia, Canada, and his Ph.D. in Finance from University of Chicago, USA. Prior to joining us, Dr. Li was Visiting Professor of Finance at University of California, Riverside, and Professor of Finance at California State University, Fullerton. He also taught at Purdue University and University of Michigan. He has contributed extensively in the fields of economics, finance, management science and real estate. His publications in these areas have appeared in American Economic Review, Journal of Finance, Review of Financial Studies, Journal of Financial Research, Journal of Empirical Finance, Management Science, Real Estate Economics, Journal of Urban Economics and other high-quality business journals.
Dr. Lixin Huang joined the department as a Assistant Professor in August 2002. He graduated from the University of Pennsylvania, USA in 2002. His research interests are banking, corporate finance, liquidity and asset pricing.
Mr. Tom Vinaimont joined the department as a Lecturer in August 2002. He received his education from the University of Leuven (KULeuven), Belgium where he enrolled in the undergraduate and graduate programs of the Department of Applied Economics. His doctoral studies in finance at the University of Leuven focused on practical applications of models of the term structure of interest rates. During his PhD studies, he spent one year as a Visiting Scholar at the Stern School of Business at New York University, USA. His recent research papers are in the areas of the term structure of interest rates, international finance and corporate finance.
Dr. Isabel K M Yan joined the department as a Assistant Professor in August 2002. She obtained her Ph.D. in Economics and her M.Sc. in Statistics from the Stanford University, USA. She obtained her B.S.Sc.(first class honours) in Economics from the University of Hong Kong in 1996. She specializes in the study of currency and banking crises as well as the development of South-East Asian economies. Her recent paper on the prediction of currency crises was published as a policy paper of Stanford Institute for Economic Policy Research(SIEPR). She has teaching experience in Econometrics and International Economics.
Departures
Prof. Lin Zhou (formerly Professor), Dr. Stephen T F Ching (formerly Associate Professor), Dr. Xianming Zhou (formerly Assistant Professor), Dr. Lawrence O C Khoo and Dr. Shunli Yao (formerly Visiting Fellows) left our department between June and August this year. We thank them for their past contributions to our department and City University of Hong Kong. We also wish them every success in their new environments.
Research Seminars
Our department organizes seminars (almost) weekly. The objective of this well-attended series is to provide a regular forum to communicate recent contributions to economics and finance by local and overseas scholars. We will announce the schedule later. Please contact Dr. Yong Wang at (852) 2788-7286 or e-mail to efywang@cityu.edu.hk for details.
