Why do Economic Research in Singapore?

Ben Charoenwong
7 min readDec 30, 2018


When I completed my first year as an assistant professor of finance at NUS Business School, I felt that some students had some misconceptions about academic economic and finance research. We seem understand research when applied to STEM: they 3D print electric cars or use AI to treat cancer. But we know much less about research non-STEM fields.

There are plenty of detailed explanations on what research is (for example, this write-up from the U.S. Office of Research Integrity) or tips to do research, but I still felt what is lacking are some examples of what economists actually do and why it matters.

Here, I share some examples of economic research and also how I first got interested in it. My hope is that anyone reading this, particularly current students, will get a little more insight into what professors in finance and economics do and how their research can influence public policy, opinion, and the real outcomes of so many people. Although I’m writing this piece specifically with Singaporean students in mind, I think many of the points would be more generally applicable as well.

What do Economists do?

Economists study the allocation of scarce resources. And since most things on earth are scarce, such as attention, water, information, and land, economists have almost free reign to study almost any topic that interests them. My first interest with economics was wondering why some of my classmates at the Singapore American School had a larger allowance than I did for school. Their parents were investment bankers, so I wanted to learn more about what they do.

I wanted to know investment banks’ role in society (to help corporations find funding in order to take risk and build new ventures), their market structure (partly through network and reputation effects, a handful of investment banks around the world have large market shares), and their incentives (sometimes they are compensated just for originating and creating new products and do not have skin in the game as to whether those products are high quality ).

Indeed, it is hard to make sense of the world without an understanding in basic economics and finance. As the FT puts it, “We Live in Financial Times”.

Economic Research is Important.

A colleague of mine tells his students very succinctly: “when economists get things wrong, we get the Great Depression or the Financial Crisis”. I agree. We have seen what happens when policy decisions are based on flaw economic models and an incomplete understanding of the empirical facts in the world.

Uses of Economic Research

Given the potentially board interpretation on “scarcity”, there is a dizzying amount of fields. They can be roughly (but not completely) grouped into microeconomics research that focus on individual decisions or markets and macroeconomic, which treats the whole economy or world as an ecosystem with each agent reacting to incentives. But beyond these topics, economic research is useful for three main reasons: (1) informing public policy, (2) forcing coherent thinking (which may then in turn inform public policy), and (3) developing new methods.

Informing Public Policy.

Some research that we do involve evaluating different government programs to see if they (1) achieved their objectives, or more something that’s more interesting to me personally, (2) generated unintended consequences. These are not to say that government programs are bad, but both lines of research help us learn more about how people make decisions. I would say this is where most of my own research can be applied as well.

For example, whether people are able to make sophisticated financial decisions are important to new policies in Singapore like the Open Electricity Market, allowing people to choose their own provider out of a menu of over 10 options. The old paradigms in economics dictate that more choices cannot make anyone worse off, but with the new paradigm where economists better understand cognitive constraints and other psychological biases, we can do better.

Research that informs public policy can take many forms. An example can be a policy evaluation, or simply a description of different markets in the economy so that we get a better understanding of how they work. Both of these examples a primarily data-driven in nature, but useful research for public policy often times also take the form of economic theory.

Forcing Internal Consistency.

Finally, economic theory research — even those that do not primarily deal with data or do much quantitative analysis — help us develop intuition. Mathematical economic models are logical statements that force us to think logically. (These economic models also have a certain aesthetics to them, but I focus on its applications. Hal Varian, Chief Economist at Google and professor of economics at UC Berkley puts this eloquently.)

The intuition from these economic models do not just train us to think coherently, but also inform empirical research that is relevant for economic policy.

Here’s a snippet from the syllabus of my international finance course, adapted from my teaching mentor, Professor of Economics at Chicago Booth and Yao Ming’s NBA agent, John Huizinga, “A model is a mathematical description of a simplistic, stylized economy. Economists make positive (compared to normative) statements based on intuitions and results from models. Your goal should be to master how these models work, and to be able to extrapolate from the model to understand how the real world works…Since all models require some sets of assumptions, I will also develop tests of certain models to determine where a model is useful and where it is not…. Math is a tool, a means to an end. It is used to develop your intuition. It provides rigor, logic, and power to the analysis we do. By power I mean that results will emerge from the use of math that would not emerge if we did the analysis without math.”

Although there have been some recent calls to get some math out of economic research, including by 2018 Nobel Prize-winner Professor of Economics Paul Romer at New York University, the usefulness of economic theory is not questioned.

But apart from the “old vanguard” of mathematical economic modeling, a new frontier of economic and financial research has emerged. It is in new computational or data-processing methods in light of recent advances in data gathering, data storage, and computational power.

Developing New Methods.

This line of research focuses on developing tools and techniques (called econometrics). As more data becomes available, this approach to research attempts to keep our toolkit up to date so that we are not limited in computational power and also to avoid being misled by data.

Research in this area easily spills crosses over between academia and industry since plenty of companies need tools to process big data. However, a difference between academic research and industry applications for this field is academics use these tools to primarily test some economic theory or quantify some economic phenomena, whereas industry applications do not require that. (This doesn’t mean that industry researchers do not use sophisticated structural modeling of economic decisions as well. A nice example of this is that many targeted pricing algorithms used by online merchants actually estimate demand functions.)

Of the three uses of economic research, methods most easily transcend geographical constraints. New developments in the methodology for data processing or economic modeling can be applied without prejudice to data from different countries.

Sample Economic and Finance Research from NUS Business School

Let’s see a couple examples of useful economic research. I add this here since there have been some recent thought-provoking op-eds that appear to belittle non-STEM research based in Singapore, stating “If, as is likely, standards [at local universities like NUS or NTU ]are determined by research publication in highly ranked global disciplinary journals, locally specific research is less likely to “make the cut”. This disadvantages faculty pursuing such research, who are more likely to be locals.”

Since the article makes a broad claim that is so easily refuted by facts, I thought it may be helpful to quickly provide 5 examples of economic research based on or directly applicable to Singapore in the case of theory or methods, all in top-tier research, peer-reviewed finance or economic journals. (Research using data from other countries can still provide relevant insights for policymakers in Singapore, but for simplicity I focus on the most direct research.) All these examples are from my colleagues in the finance department (whose research I know best. No doubt faculty members from other departments and schools in NUS have more top-tier research based on Singapore). I include a classification in bold.

  1. Policy Evaluation: Households in Singapore spent $0.80 per dollar in response to an unexpected cash gift from the government, implying a fiscal multiplier of 5, which suggests these policies are pretty useful for stimulating the economy.
  2. Describing the Market: There seems to be racial affinity in housing markets in Singapore.
  3. Describing the Market: Stock markets in 45 countries around the world compensate investors for taking on illiquid stocks.
  4. Describing the Market: Stock prices in emerging markets are synchronous and more highly correlated than their fundamentals.
  5. Methods: A maximum-likelihood estimator approach to estimate credit risk models when stock prices are noisy.
  6. Bonus: Methods: (Not academic research, but high-value added to many banks and other financial institutions) Setting up the Credit Research Initiative to delivery daily default probabilities on over 67,000 exchange-listed firms in 128 economies.



Ben Charoenwong

Assistant Professor of Finance at the National University of Singapore. Michigan and Chicago alum. I write random musings and complain about business media.