How do trader characteristics explain international pricing behaviour? Evidence from Taiwan and UK customs trade data.
Lead Research Organisation:
University of Birmingham
Department Name: Economics
Abstract
In 2019, the UK ranks as Taiwan's 3rd largest trading partner in Europe, while Taiwan is the UK's 7th largest trading partner in Asia (Taiwan's Ministry of Foreign Affairs). As the Brexit transition period ends and the UK will be able to develop its own independent trade policies, Taiwan and the UK have sought to boost trade and strengthen the economic partnership between the two countries in recent rounds of bilateral trade talks.
As both countries are small open economies trading next to a large neighbouring economy that is also their main trading partner, namely China and the EU, respectively, Taiwan and the UK stand to benefit from having a joint academic network that can share best practice and facilitate knowledge exchange between two trade teams that already have access to highly disaggregate transactional-level customs trade data and firm-level financial data for Taiwan and the UK.
This project aims to establish a close working partnership through the development of three work packages. The first package is to initiate closer networking by establishing a close working relationship between the two trade teams for (i) sharing experience in working with confidential customs data and discussing scope for data sharing through a launch event, (ii) training early career researchers who will be working with big data through a workshop, and (iii) engaging with wider research communities and policy audience through a closing conference to disseminate our research output.
Our second work package will initiate joint research activities with a research project on how different traders respond differently in terms of international pricing in response to external shocks such as exchange rate movements. In particular, we will focus on two aspects of trader characteristics in both countries (i) firms' financial constraints and (ii) firms' dependence on the largest trading partners (China for Taiwanese firms and the EU for UK firms), in explaining firms' pricing strategies. We will take an innovative approach to identify these characteristics for both countries in the context of Taiwan-UK bilateral trade, and our findings will have strong policy implications for small open economies when making inflation forecasts or predicting the effectiveness of monetary policy.
Finally, our third forward-looking package will develop a 3-year plan as Areas of Interest for Taiwan-UK trade 2023-2026, to be advertised with a designated social media account. We will also seek to develop policy impact, for instance, by promoting potential bilateral trade facilitating policies such as a mutual recognition agreement for each other's trusted traders between Taiwan and the UK.
As both countries are small open economies trading next to a large neighbouring economy that is also their main trading partner, namely China and the EU, respectively, Taiwan and the UK stand to benefit from having a joint academic network that can share best practice and facilitate knowledge exchange between two trade teams that already have access to highly disaggregate transactional-level customs trade data and firm-level financial data for Taiwan and the UK.
This project aims to establish a close working partnership through the development of three work packages. The first package is to initiate closer networking by establishing a close working relationship between the two trade teams for (i) sharing experience in working with confidential customs data and discussing scope for data sharing through a launch event, (ii) training early career researchers who will be working with big data through a workshop, and (iii) engaging with wider research communities and policy audience through a closing conference to disseminate our research output.
Our second work package will initiate joint research activities with a research project on how different traders respond differently in terms of international pricing in response to external shocks such as exchange rate movements. In particular, we will focus on two aspects of trader characteristics in both countries (i) firms' financial constraints and (ii) firms' dependence on the largest trading partners (China for Taiwanese firms and the EU for UK firms), in explaining firms' pricing strategies. We will take an innovative approach to identify these characteristics for both countries in the context of Taiwan-UK bilateral trade, and our findings will have strong policy implications for small open economies when making inflation forecasts or predicting the effectiveness of monetary policy.
Finally, our third forward-looking package will develop a 3-year plan as Areas of Interest for Taiwan-UK trade 2023-2026, to be advertised with a designated social media account. We will also seek to develop policy impact, for instance, by promoting potential bilateral trade facilitating policies such as a mutual recognition agreement for each other's trusted traders between Taiwan and the UK.
| Description | Aston-Birmingham Trade Network |
| Organisation | Aston University |
| Country | United Kingdom |
| Sector | Academic/University |
| PI Contribution | We have developed a new Aston-Birmingham Trade Network for knowledge exchange purposes. Our team members (both PI and co-I) have since contributed to leading joint reading club sessions in 2023. |
| Collaborator Contribution | Our Taiwan partner's visit to the UK marked the launch of this partnership. During Prof Fung's visit, we invited Professor Jun Du and Dr. Oleksandr (Sasha) Shepotylo from Aston University to join the event, as the Aston team has had significant experience in working with UK customs trade data. This networking event helped our team members to learn best practices in working with customs data, as well as identifying practical solutions to challenges around data matching when firm IDs and trader IDs are not well defined. |
| Impact | The Aston-Birmingham Trade Network is now with an active reading club which meets every quarter. The event is hybrid and all trade economists and research students are invited. We have also initiated collaboration in joint grant applications. |
| Start Year | 2022 |
| Description | HMRC Datalab |
| Organisation | HMRC HM Revenue & Customs |
| Country | United Kingdom |
| Sector | Public |
| PI Contribution | As a trusted trader with access to HMRC's confidential trade and VAT statistics, the PI has engaged closely with both HMRC's datalab team and trade team, by for instance, helping to answer inquiries regarding data descriptions and data matching processes from prospective researchers and new users (e.g., from University of Essex and Bank of England). The PI also regularly provides feedback whenever requested to contribute to the smooth running of the datalab facilities. |
| Collaborator Contribution | The HMRC datalab team manages and maintains the facilities (with restricted access) based in London. They also help with the release of intermediate and final research output, which are subject to confidentiality checks. |
| Impact | The UK team has been working with the UK's customs data (the HMRC datalab based in London) and produced preliminary summary statistics relating to the currency of invoicing pattern for the UK-Taiwan bilateral trade. We are working on a short policy report. The progress, however, has been severely delayed due to Covid travel disruptions and the closure of the HMRC datalab. This collaboration is between academia and public sector. |
| Start Year | 2021 |
| Description | Ministry of Finance (Taiwan) |
| Organisation | Ministry of Finance |
| Country | Taiwan, Province of China |
| Sector | Public |
| PI Contribution | Our team joins the trade team at National Taiwan University which has access to confidencial trade data from Financial Data Centre, Ministry of Finance (Taiwan), based in Central Taiwan. This Data Centre has only been set up in recent years, and our team contributes to this collaboration by sharing with the administrative team our experiences in working with HMRC's datalab, including data transfer process and intermediate output release. |
| Collaborator Contribution | The Financial Data Centre team manages and maintains the facilities (with restricted access). They also help with the release of intermediate and final research output, which are subject to confidentiality checks. |
| Impact | This partnership involves joint research projects using Taiwan's confidential customs trade data and firms' financial data. The main research outcomes are two research papers and two joint grant proposals. Details will be discussed in the key output section. This collaboration is between academia and public sector. |
| Start Year | 2021 |
| Description | National Taiwan University and National Tsing Hua University (Taiwan) |
| Organisation | National Taiwan University |
| Country | Taiwan, Province of China |
| Sector | Academic/University |
| PI Contribution | As part of the networking project, our team is in collaboration with Prof. Jin-Tan Liu (National Taiwan University) and Prof. Fung (National Tsing Hua University) for a working project entitled "Asymmetry in exchange rate pass-through." Our UK team contributes to the collaboration by bringing experience in working with the UK's customs trade data (from HMRC). The PI has also provided supervision guidance through meetings to ECRs (PhD and MSc researhc students) at National Taiwan University during 2 research visits in September-October 2021 and September-November 2022. |
| Collaborator Contribution | Professor Jin-Tan Liu leads the only trade team in Taiwan that has access to Taiwan's confidential customs trade data from Ministry of Finance. This has been central to our research project. I also received extra funds (travel subsistence) from an external project led by Professor Jin-Tan Liu. Professor Fung contributes the project by sharing her extensive experience in working with Canada's confidential customs trade data. |
| Impact | PI's 2 research visits to Taiwan & Taiwan co-I's (Prof. Fung) research visit to the UK (which involve various engagement activities documented in the relevant section) ; other key outputs are 2 research papers (work in progress) and 2 joint grant proposals. |
| Start Year | 2021 |
| Description | National Taiwan University and National Tsing Hua University (Taiwan) |
| Organisation | National Tsing Hua University (Taiwan) |
| Country | Taiwan, Province of China |
| Sector | Academic/University |
| PI Contribution | As part of the networking project, our team is in collaboration with Prof. Jin-Tan Liu (National Taiwan University) and Prof. Fung (National Tsing Hua University) for a working project entitled "Asymmetry in exchange rate pass-through." Our UK team contributes to the collaboration by bringing experience in working with the UK's customs trade data (from HMRC). The PI has also provided supervision guidance through meetings to ECRs (PhD and MSc researhc students) at National Taiwan University during 2 research visits in September-October 2021 and September-November 2022. |
| Collaborator Contribution | Professor Jin-Tan Liu leads the only trade team in Taiwan that has access to Taiwan's confidential customs trade data from Ministry of Finance. This has been central to our research project. I also received extra funds (travel subsistence) from an external project led by Professor Jin-Tan Liu. Professor Fung contributes the project by sharing her extensive experience in working with Canada's confidential customs trade data. |
| Impact | PI's 2 research visits to Taiwan & Taiwan co-I's (Prof. Fung) research visit to the UK (which involve various engagement activities documented in the relevant section) ; other key outputs are 2 research papers (work in progress) and 2 joint grant proposals. |
| Start Year | 2021 |
| Description | Academic seminar at Academia Sinica (Taiwan) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Academia Sinica is the most prestigious research institution in Taiwan. The PI gave a talk about the project and research findings during a research visit in November 2022. Around 30 researchers in the academy attended. This engagement event also involved lunch and several one-on-one meetings with researchers working on the international economics/trade field. Significant knowledge transfer sparked proposals for further collaboration. |
| Year(s) Of Engagement Activity | 2022 |
| Description | Academic seminar at National Tsing Hua University (Taiwan) |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Postgraduate students |
| Results and Impact | I was invited to have lunch with the faculty members and give a talk in the external seminar at National Tsing Hua University in Taiwan in October 2021. The talk was on my current research on UK's trade facilitating programme using HMRC data. The audience consists of mainly reearch staff and postgraduate research students. Following the talk we also had a Q&A session afterwards about studying in the UK for PhD. I was invited again in November 2022 to engage with staff and postgraduate research students. |
| Year(s) Of Engagement Activity | 2021,2022 |
| Description | ECR Engagement |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Postgraduate students |
| Results and Impact | 4 postgraduate research students attended a research engagement event held at National Taiwan University where their projects and progresses were discussed. I contribute to knowledge transfer in terms of using different big data, research directions, and expected research outcome. We also discussed all available administrative data in Taiwan and how these data could be linked with each other. One student who is working on currency hedging took most suggestions and expressed gratitude later for setting a new direction for his research. Following this event, I have also been providing mentoring sessions and career advice to a final year PhD student at National Taiwan University and ECR (Chun-yen Wu) and was asked to be his reference for job applications. |
| Year(s) Of Engagement Activity | 2021 |
| Description | Policy engagement at the Central Bank of Taiwan |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | I was invited to give a seminar talk on exchange rate pass-through at the Central Bank of the Republic of China (Taiwan). This was considered a high-level event with the talk hosted directly by the Governor of the Central Bank. The audience includes monetary policy makers, researchers, and postgraduate students from National Taiwan University. Following the talk there was a long Q&A session which sparked questions and discussions about Taiwan's currency of invoicing pattern and its implications for exchange rate pass-through into import prices. They reported significant knowledge enhancement (as data available to our team are strictly confidential and the CB has no access to firm-level currency of invoicing pattern, for example), and requested for further engagement in the future. During this visit, I also had the privilege to interact the Governor of the Central Bank of Taiwan, Mr Chin-long Yang, who is also a Birmingham PhD Alumni, for research discussions over lunch (joint by Dr. Jin-tan Liu, Professor of Economics at National Taiwan University). I also met the Deputy Governor, Dr. Chen Nan-kuang, who is also Professor of Economics at National Taiwan University for a discussion on his vision to boost collaborations between the Central Bank and the international research community. |
| Year(s) Of Engagement Activity | 2021 |
| Description | Research visit to the UK by Prof. Fung |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Prof. Fung visited University of Birmingham for 3 days in August 2022. This research visit involved (i) meeting ECRs for research discussions; (ii) research engagement with third party participants from Aston University; (iii) a research talk on trader response to the US-China trade wars; (iv) team meetings with UK team members (PI and co-I). |
| Year(s) Of Engagement Activity | 2022 |