This paper is the first empirical study of banks’ risk management systems based on non-anonymous daily Value-at-Risk (VaR) and profit-and-loss data. Using actual data from the six largest Canadian commercial banks, we uncover evidence that banks exhibit a systematic excess of conservatism in their VaR estimates. The data used in this paper have been extracted from the banks’ annual reports using an innovative Matlab-based data extraction method. Out of the 7354 trading days analyzed in this study, there are only two exceptions, i.e. days when the actual loss exceeds the disclosed VaR, whereas the expected number of exceptions with a 99% VaR is 74. For each sample bank, we extract from historical VaRs a risk-overstatement coefficient, ranging between 19 and 79%. We attribute VaR overstatement to several factors, including extreme cautiousness and underestimation of diversification effects when aggregating VaRs across business lines and/or risk categories. We also discuss the economic and social cost of reporting inflated VaRs.

With capital controls, the standard financial market transactions needed for currency carry trade are hard to implement. Using detailed trade data reported by both the mainland Chinese and Hong Kong’s governments, we present evidence that indirect currency carry trade likely takes place via round-trip reimports. We also show that greater state control in terms of more state-owned firms does not reduce such “carry trade by trucks.”

This paper proposes a framework for gross exports accounting that breaks up a country's gross exports into various value-added components by source and additional double counted terms. By identifying which parts of the official trade data are double counted and the sources of the double counting, it bridges official trade (in gross value terms) and national accounts statistics (in value added terms). Our parsimonious framework integrates all previous measures of vertical specialization and value-added trade in the literature into a unified framework. To illustrate the potential of such a method, we present a number of applications including re-computing revealed comparative advantages and the magnifying impact of multi-stage production on trade costs.

This paper develops a theoretical framework to study the critical role that politics play in shaping the spatial dimension of China's urbanization and the related welfare implications. Utilizing a large data set of residential land transactions matched with city leaders in 200 Chinese cities from 2000 through 2011, the empirical analysis finds that a 1 standard deviation increase in the career-incentive measure leads to 9 additional kilometers of outward expansion, a 23% increase relative to the sample average. It also finds some suggestive evidence pointing to the distortionary impacts of overly strong incentives of city leaders on spatial expansion, consistent with the theory.