Funded Projects for APAEM Members.

Our research team strives to have societal impact with our projects. If your organization is interested in becoming one of our collaborators, please contact us at

Asian Economics

(Team members)

Monetary Policy and Wealth Inequality: Evidence from China

Principal Investigator: Prof. Brenda ZHANG

China has emphasized promoting common prosperity in recent years to narrow the wealth inequality. Based on channels identified by Auclert (2019), this project investigates the impact of China’s monetary policy on households’ wealth levels and wealth distribution using data from the China Family Panel Studies (CFPS) during 2012-2018. Analysis shows that: (1) household wealth is more affected by real interest rate adjustments than unexpected inflation; (2) the impacts of monetary policy loosening and tightening cycles on household wealth are not symmetric and a persistently accommodative interest rate policy may do more harm than good to social wealth; (3) financial development raises the sensitivity of household wealth to monetary policy adjustments with heterogeneous effect across different channels.

R&D Efficiency of the GD-HK-MO Greater Bay Area

Principal Investigator: Prof. Fung KWAN

Using official regional and prefecture-level data of the Guangdong-Hong Kong-Macao Greater Bay Area, the project studies the efficiency of R&D technical efficiency with its determinants across cities and sectors over time. Policy implications for appropriate industrial policy are examined. The objectives of the project include: (a) identifying the sources of innovation growth in GBA; (B) examining the R&D efficiency across the GBA cities; and (c) assessing the R&D efficiency change in GBA over time.

Moving Forward and with Confidence: Improving College Admissions and School Choice through Sequential Mechanisms

Principal Investigator: Prof. Inácio BÓ

Procedures used for many school choice programs and centralized college admissions require the participants to submit a ranking over all the schools or colleges. The widespread use of the Internet, however, allows for new methods for determining these assignments through the use of sequential mechanisms. In these, participants choose their desired outcome from the options available, which are updated accordingly, before a final matching is produced. This allows students to focus their applications away from institutions that will not accept them, given other students’ choices. In this project, we evaluate sequential mechanisms currently being used to match millions of students to universities and proposed alternatives, testing their theoretical and empirical properties and the extent to which they help students make better choices and improve assignments. We will also provide a new mechanism to be used in these problems, which combines contemporaneous choices with historical statistics to produce assignments.

Investigating the Co-existence of the Gambler’s Fallacy and the Lucky Store Effect and Its Theoretical Mechanism

Principal Investigator: Prof. Jia YUAN 

The project aims to examine individual gambling behavior by investigating one important question: can the seemingly contradicting fallacies: Gambler’s Fallacy (GF) and the Lucky Store Effect co-exist in the same context? If so, what is the behavioral theory to reconcile these two seemingly contradicting phenomenon?

The project aims to explore this issue by exploiting a unique large peer-to-peer online lottery marketplace for the Chinese national lottery. The project wants to investigate whether lottery players exhibit Gambler’s Fallacy beliefs when picking lottery numbers and meanwhile whether they believe in ‘lucky stores’ when choosing which online lottery store to purchase their tickets from. More importantly, the project focuses the co-existence of these fallacies and if so, plans to propose a simple behavioral theory to reconcile these two seemingly contradicting phenomenon.

Career Incentives of Local Leaders and Firm Dynamics in China

Principal Investigator: Prof. Leona LI

This project aims to assess how the career incentives of local leaders in China impact the entry and exit dynamics of firms. Despite having relatively weak formal institutions, China has achieved impressive economic growth. Emerging studies suggest that this may be attributed to the existence of a second-best, informal institution setup, where local politicians in China, facing the regional decentralized tournament system, are incentivized to promote economic development to advance their personal careers. Through the lens of firm entry and exit, we investigate both the advantages and limitations of this special institutional arrangement, contribution to the important literature that explores the institution-development nexus.

An Econometric Anatomy of Global Tourism Development

Principal Investigator: Prof. Priscilla TAM

The tourism industry has been the largest and one of the fastest growing industry in the world. Tourism expansion has been actively sought by economies around the globe as an engine for economic development and growth. Yet, the restricted mobility of people cross borders during the novel coronavirus period has called for a near standstill of international tourist flows, thereby bringing colossal economic losses to the tourism industry. To devise strategies for reinventing the industry in the post-pandemic new normal, this project purports to examine the global tourism development dynamics and analyze the steady-state condition along the long-run growth trajectory. To this aim, global tourism demand growth will be decomposed into its structural and cyclical components, the region(s) of centroid for global tourism development will be identified, while the contributions of economic, social and political forces that drive international tourism demand will also be scrutinized.

The Effect of China Connect

Principal Investigator: Prof. Sili ZHOU

The Shanghai (Shenzhen) -Hong Kong “Stock Connect” program allows investors in mainland China and Hong Kong residents and foreign investors to trade eligible stocks listed on the other market, through the exchange and clearing houses in their home markets. This program, announced in April 2014 and begun in November 2014, is regarded as a major step toward internationalizing China’s security markets.

The project analyzes the effects on Chinese firms of the “China Connect” equity market liberalization. Because China is a capital abundant country, unlike typical emerging markets in the literature, the benefits and costs of liberalization are logically different. Nonetheless, the liberalization brought benefits: lower funding costs, higher stock prices, and more investment for connected firms compared to unconnected firms, despite a common negative effect on all firms from capital outflows. These benefits come from a new channel: reducing domestic credit misallocation between private- and state-owned enterprises. The project also documents costs: connected firms became more sensitive to external shocks than unconnected firms.

Effects of Monetary Policy and Subsidy Policy on Innovation and Economic Growth in a Data Economy

Principal Investigator: Prof. Yibai YANG

This project aims to explore the impacts of two policy instruments on innovation and economic growth in a data economy. The policy instruments in consideration include monetary policy and subsidy policy. Therefore, this project will consist of two research topics, including how (a) monetary policy (in terms of inflation) and (b) subsidy policy (in terms of research subsidies) on innovation and economic growth in a dynamic general equilibrium model with a data-provision process.

Data has become an important factor in the process of consumer behavior and knowledge accumulation, with the development of technologies in modern economies. Inflation places an extra cost burden in consumption, manufacturing, and research and development (R&D) investment, whereas subsidization is one crucial policy instrument that governments implement to steer the market economy. Therefore, it is important to explore how these policy tools affect the use of data, leading to implications on innovation, economic growth and social welfare. This project expects to make significant contributions in terms of theoretical exploration and policy implications.

Effects of R&D Policy on Technology Transfer, Economic Growth and Social Welfare

Principal Investigator: Prof. Yibai YANG

* Co-funded by the Research Grant of Department of Science and Technology of Guangdong (2022–2024)

Research and development (R&D) policy differs from other policies in its various forms and easy implementation. R&D policy may also vary substantially across countries and regions. There is no consensus in the literature about the effectiveness of R&D policy on promoting technology transfer and stimulating economic growth. Exploring this problem not only contributes to the theoretical literature, but also helps designing long-run policy systems that increase technological innovations and facilitate the growth process. This project focuses on two regimes of R&D policy: patent policy and subsidy policy, to systematically study the mechanisms behind which these policy regimes affect technology transfer and economic growth. First, based on cross-country data, this project will analyze summary statistics regarding R&D policy, technology transfer, and economic growth to identify the important roles of R&D policy under different growth frameworks. Second, according to the steady-state and dynamic features of R&D policy, dynamic general equilibrium frameworks with endogenous growth will be constructed to characterize the behaviors of households, firms, and governments. Then by using methods of numerical dynamic programming and empirical moments matching, combined with macroeconomic database, the model is solved analytically and numerically in addition to calibrating parameters. Finally, the calibrated parameters will be used to perform quantitative simulations about the impacts of patent design and subsidization setup on technology transfer, economic growth, and social welfare, respectively. The simulated outcomes will provide qualitative implications that evaluate policy alternatives for their implementation.

Financial Innovation 

(Team members)

Research Proposal on Constructing the “Cross-Border Data Circulation Base” in Hengqin In-depth Cooperation Zone

Principal Investigator: Prof. Guangjian TU

Differences exist in the laws between Mainland China and Macau SAR on cross-border data flow. To ensure the legal compliance of cross-border data flow has become a prominent issue faced by businessmen in mainland China and Macau SAR in their business transactions. In this case, by seizing the opportunity of developing the Hengqin In-depth Cooperation Zone, it will be an effective solution to establish a data circulation base in Hengqin to enable businesses to exchange their data. The establishment of such a base must be dependent on the laws of the two sides. The legal system in Macau has strong historic origin of and high similarities with Portuguese-speaking countries. Therefore, before studying the cross-border data flow regulation between Mainland China and Macau SAR, it is necessary to make an understanding of the relevant legislations of Portuguese-speaking countries. At the same time, data legislations in the European Union, the United States and some other countries, are earlier than that of China, and have certain international influential power. Their mature experiences in data legislation can also provide a reference for the research of this project.

In Search of IPO Peers Using Textual Approach

Principal Investigator: Prof. Jinjuan REN

Valuations in Initial Public Offering (IPO) are notoriously difficult, and the related literature is controversial regarding the initial mispricing and long-run performance. Finding comparable peers is critical in solving the disputes. Traditional peers matched by industry, size, and profitability have two limitations. First, the traditional industry classifications fail to classify firms with innovative business or covering multiple industries. Second, due to the high growth potential and high uncertainty of IPO firms, the current profitability fails to reflect the future prospects, which are critical in the forward-looking financial valuation.

This project applies the text-based approach of Hoberg and Phillips (2016) to identify peers matched by the business scope. The text-based peers can accommodate new-technology business, capture cross-industry relatedness, and does not rely on historical financial information. The project plans to explore the performance of various peers in IPO valuations. Preliminary evidence shows that the text-based peers have the highest aftermarket return correlations with IPO firms. The project plans to further investigate IPO pricing and long-run performance using the text-based peers as the benchmark. The results are expected to make important contributions to the IPO valuation literature and provide references to investment bankers in IPO underwriting.

Criminal Liability of Arbitrators: Law and Practice in China

Principal Investigator: Dr. Zhe MA

Arbitrators are generally obliged to perform their duty to solve commercial disputes independently and impartially. When they fail to comply with this duty they may be legally liable for their misconduct. This liability usually assumes the nature of contractual or tort liability. By comparison, criminal liability of arbitrators is rarer, at least at the practical level. In this aspect, China stands as an outlier, not only having established a set of criminal provisions to regulate arbitrators, including specific provisions regarding bribery of arbitrators and a crime named “perversion of law” in 2006, but indeed there have been a number of cases where defendants have been convicted as a result of these provisions. This approach was received with skepticism by some Chinese and foreign legal practitioners who warned that this approach could discourage the usage of arbitrators in China and that it would give police and court authorities overbroad powers to intervene in arbitral proceedings.

Considering the importance of arbitration in China and world trade, this research will focus on reviewing the application of the aforementioned legislation in the period 2006-2023. A combination of data analysis and judgement content analysis is performed to discover how arbitrators in China are criminalized, including an identification of key players in prosecuted cases, crime patterns and punishments. Based on the data, the study offers insights into the impacts of criminal legislation on arbitrators and to what extent, if at all, this legislation has been used to disrupt arbitral proceedings.

Impact of Financial Technology (Fintech) on Banking and Small-Medium Enterprises (SMEs)

Principal Investigator: Prof. Rose Neng LAI

Industry Collaborator: BOC

Many global research institutes have proven that COVID-19 has profound impact on our livelihoods and lifestyles, shifting how consumers shop, spend and consume. even though the pandemic situation in Macao is much milder than the rest of the world, consumption patterns have still gone through significant changes. In addition, the Macao government has planned to increase the development of the digital economy, including financial technology (Fintech). Mobile payments and money transfers between banks and mobile payment providers are some simple forms of Fintech. Through this study, we attempt to analyze the potential penetration of “Simple Pay” initiated by the Monetary Authority of Macao (AMCM), as well as implications to the small and medium-sized enterprises (SMEs).

High-Dimensional Financial Index Tracking based on the Regularization Approach

Principal Investigator: Prof. Jet Lianjie SHU

* Co-funded by the Research Grant of Department of Science and Technology of Guangdong (2022–2024)

For financial index tracking, a sparse tracking portfolio with only a small number of assets is often desirable in practice in order to avoid small and illiquid positions and large transaction costs. The tradition way of using Cardinality constraints to directly to limit the number of stocks is if often difficult and computationally intensive as the resulting optimization problem is NP hard. Owing to its computational efficiency and variable selection properties, this project employs the regularization technique originating from high-dimensional statistics for sparse index tracking in high dimensions.

Smart Tourism

(Team members)

Decentralized Finance (DeFi): Laws and Regulations

Principal Investigator: Prof. Li DU

The financial activities in the metaverse are essentially the decentralized finance (DeFi), which is based on the blockchain system. The security of DeFi, therefore, is critical for the future development of metaverse-related economic industries, especially the metaverse tourism. However, by April 2022, a financial loss of more than $3.24 billion USD has been caused by a vulnerability in the smart contracts that make up financial apps. Blockchain companies who perform audits of DeFi applications can find smart contract logic flaws and interactions with other DeFi entities. However, the previous studies discovered that many accidents occurred on DeFi applications that had been audited, indicating that the quality of services provided by DeFi audit companies varies. This research aims to explore DeFi audit companies’ potential to resolve the loss in DeFi incidents and examine legal issues associated with using DeFi auditing services. This study will promote a safer cryptocurrency industry in the Asia-Pacific region, where virtual assets have been identified as key growing economies.

Metaverse and Tourism Destinations’ Sense of Place

Principal Investigator: Prof. Li MIAO

Sense of place, what a tourist thinks and feels about a geographically-defined region or community, has been a central concept of tourism. The traditional conceptualization of sense of place is based on the assumption that a constellation of place-related cognitions and affects is contained within the physical boundaries of a place. However, the advent of metaverse, a confluence of multiple advanced technologies, has challenged the long-held assumption of clear geographical demarcation of a place. Metaverse also extends the temporal, spatial and experiential dimensions of a place. In other words, what constitutes a place is being redefined. In addition, latest sensory technologies have significantly augmented our senses, redefining what constitutes senses. It is not a stretch to suggest that metaverse significantly alters and expands the meanings of place, sense, and sense of place. Given this context, this research attempts to explore how metaverse as a confluence of technologies and as a new paradigm is redefining sense of place. Specifically, the objectives of the research are to: (a) conceptually redefine sense of place in a metaverse realm; (b) identify key attributes of sense of place in a metaverse realm; and (c) empirically investigate sense of place in a metaverse context.