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AbstractThis paper investigates the impact of financial conditions, for example, cross‐border capital flows, interest rates and foreign exchange rates, on the well‐being of the real estate developers in five Association of Southeast Asian Nations economies. The study uses a Bottom‐up Default Analysis model to stress test their creditworthiness by reproducing the financial shocks during the global financial crisis, taper tantrum, and the U.S.‐China trade war and COVID‐19 pandemic. The median developers remain sound under the prescribed adversities. The performance is underpinned by their strong fundamentals and a conducive mix of monetary, foreign exchange, and open capital account policies by national authorities.

Abstract.  This paper studies the nexus between the property market and macroeconomy of China in 1998–2004, using panel data models covering 31 provinces and major cities. The estimates suggest three main conclusions. First, there seemed to be a two‐way linkage between property prices and GDP growth. Second, bank credit expansion did not seem to play an 'accelerating' role in property price inflation, although the latter is found to have contributed to bank credit increases in recent years. Third, property price growth may have deviated from fundamentals in coastal areas, as evidenced by a negative relationship between housing and rental prices.

One argument for floating the Chinese renminbi (RMB) is to insulate China's monetary policy from the US effect. However, we note that both theoretical considerations and empirical results do not offer a definite answer on the link between exchange rate arrangement and policy dependence. We examine the empirical relevance of the argument by analyzing the interactions between the Chinese and US interest rates. Our empirical results, which appear robust to various assumptions of data persistence, suggest that the US effect on the Chinese interest rate is quite weak. Apparently, even with its de facto peg to the US dollar, China has alternative measures to retain its policy independence and de-link its interest rates from the US rate. In other words, the argument for a flexible RMB to insulate China's monetary policy from the US effect is not substantiated by the observed interest rate interactions.

AbstractThe revival of strong capital flows to emerging economies following the global financial crisis in 2008–2009 has rekindled the debate on effects of excessive capital inflows. We study the effects of official and illicit capital flows on Hong Kong, which is a small and open economy with minimal restrictions on cross‐border fund movements. It is found that the official and illicit capital flow measures display a low level of comovement and exhibit differential effects on Hong Kong's equity and residential housing markets. The results highlight the complexity of managing capital flows, and the relevance of sector‐specific capital management policies.