WELL‐BEHAVED PRODUCTION ECONOMIES

We show that production economies are tâtonnement stable if consumers satisfy the weak axiom of revealed preference. To ensure that producer supply decisions are well defined, we restrict prices in the tâtonnement so that positive profits cannot occur but do allow supply decisions to be multi‐valued. The model therefore permits linear activities and hence the technologies that admit capital theory paradoxes. The result thus shows that if the consumer side of the economy is well behaved then capital theory paradoxes are irrelevant for stability. Other features of the Walrasian general‐equilibrium model that have aroused suspicion (e.g. that a price below its equilibrium value may have negative excess demand and thus temporarily move even lower in a tâtonnement) may be a sign of trouble but also have nothing to do with capital theory paradoxes. We show that these phenomena arise even when there is no choice of technique and there is an aggregate production function.     

NUMERAIRE,SAVINGS AND THE INSTABILITY OF A COMPETITIVE EQUILIBRIUM

This paper addresses the stability of a multimarket competitive equilibrium. The dependence of stability on the choice of the numeraire is clarified. The traditional tâtonnement pricing is revised in order to satisfy some basic features of economic behaviour. Well‐known conditions for local stability are proved to be insufficient if a market for credit is introduced alongside the markets of dated commodities. Stability depends not only on the slopes of the demand and supply curves, but also on equilibrium prices. This result emerges without the occurrence of capital perversities, such as reswitching and reverse capital deepening.     

Expectations and policies in deflationary recessions

In this paper, we use a non‐tâtonnement dynamic macroeconomic model to study the role of inventories, expectations and wages in the business cycle. Following a restrictive monetary shock, by amplifying spillover effects inventories may imply that the economy converges to a deflationary locally stable Keynesian underemployment state. The model is applied to evaluate economic policies like quantitative easing as well as the effectiveness of holding inflationary expectations to recover to full employment. If inflationary expectations are not sufficient, imposing downward rigidity of nominal wages helps to exit from the recession.     

On controlling chaos in a discrete‐time Walrasian tâtonnement process

The simple pure exchange model with two individuals and two goods introduced by Day and Pianigiani in 1991, later extensively analyzed by Day and taken up again by Mukherji, is discussed and extended with the purpose of showing that chaos in a discrete tâtonnement process of this kind can be controlled if the auctioneer uses a smooth, non‐linear formulation of the price evolution process such that the price adjustment is a sigmoid‐shaped function of the excess demand, with given lower and upper limits. In particular, we show that, given the price adjustment speed and the excess demand function, the auctioneer can (a) stabilize the dynamics, (b) reduce the complexity of the attractor and (c) increase the economic significance of the adjustment process by simply acting on the lower and/or upper limits that constrain price dynamics.     

RESWITCHING AS A CAUSE OF INSTABILITY OF INTERTEMPORAL EQUILIBRIUM

It is generally recognized that the paradoxes of capital, of which reswitching is the most striking example, are a reason to question the existence of aggregate production functions. It is here shown that they affect intertemporal general equilibrium as well as causes of instabilities.     

Again on the Relevance of Reverse Capital Deepening and Reswitching

Among the recent interventions in the capital controversy, the debate between Paola Potestio and Kurz & Salvadori has raised important issues. We agree with Potestio's rejection of the legitimacy of a value endowment of capital but we disagree with her dismissal of the relevance of reswitching and reverse capital deepening: these phenomena are very important because they undermine the demand‐side role of the conception of capital as a single factor. For the marginal approach to be plausible, this demand‐side role had to imply the stability of the savings‐investment market even in shorter time frames than those required by a complete adaptation of the ‘form’ of capital; this was taken by Marshall to authorize doing without a given endowment of value capital, which opened the door to the shift to the modern neo‐Walrasian versions of the marginal approach. With proof from Hayek, Hicks, Malinvaud, and Lucas we argue that a continuing belief in traditional time‐consuming marginalist disequilibrium adjustments based on capital‐labour substitution is the hidden reason why the claim often made by contemporary marginalist economists, that the economy can be assumed to be all the time on the equilibrium‐growth path, is not found patently unacceptable. The true microfoundation of DSGE macromodels is not intertemporal equilibrium theory, but the time‐consuming adjustment mechanisms on whose basis the marginal approach was born and accepted, and on whose basis monetarism was then able to re‐assert a pre‐Keynesian view of the working of the economy.     

Heterogeneous Capital in a Two-Sector Overlapping-Generations Model

In a seminal paper Galor (1992) investigated the equilibrium dynamics of the well-known neoclassical two-sector growth models of the sixties within an overlapping-generations (OLG) model of the Samuelson (1958)--Diamond (1965) type. In accordance with the aggregative structure of these neoclassical growth models Galor assumed two production sectors and only one homogeneous capital good. This paper utilises the techniques which Galor developed for the homogeneous capital case in order to analyse the equilibrium dynamics of a two-sector OLG model with heterogeneous capital and static price expectations of agents. The temporary and intertemporal equilibrium characteristics of this model structure are then applied to the inconclusive Filippi (1980)--Morishima (1980) controversy over the logical consistency of Morishima's (1977) reformulation of Walras' capital theory.     

Capital controls,capital flows and external crises: evidence from India

Despite the widespread use of capital controls, India has experienced several balance of payments crises. This paper examines the solvency and sustainability of India's external imbalances and analyses the optimality of its capital flows. We use two approaches: an intertemporal model of the current account that allows for capital controls, and a composite model of macroeconomic indicators that yields probabilities of future balance of payments crises. The results indicate that India's intertemporal budget constraint is satisfied and that the path of its current account imbalances is sustainable, with some support for the optimality (given capital controls) of its external borrowing.     

Socially optimal North–South capital transfer and technology diffusion

We study North–South capital transfer and the diffusion of embodied technologies within a framework of intertemporal global welfare maximization. We show saddle path stability and characterize the steady state. We then examine the transition path by running numerical experiments based on realistic data. As a result, technology diffusion will succeed if the absorptive capacity is sufficient which requires sufficient investment. While a large share of capital is allocated to the South in early periods, this share declines in later periods when the South has caught up in terms of technologies.     

Classical and Neoclassical Indeterminacy in One‐shot Versus Ongoing Equilibria

I analyze two connections between neoclassical and classical economics. First, I consider the indeterminacy that arises for both schools: in the neoclassical theories of overlapping generations and of factor pricing and in Sraffa's price theory. Neoclassical indeterminacy occurs only in environments where relative prices can change through time; otherwise, determinacy obtains. Although these results challenge the Sraffian position on indeterminacy, the classical principle that current economic activity is embedded in the past proves to be a powerful insight: it establishes the robustness of factor‐price indeterminacy and casts doubt on the importance of overlapping‐generations indeterminacy. Second, I argue that recent claims that capital‐theoretic paradoxes arise in intertemporal general equilibrium modes, not just in aggregative theory, cannot be validated.     

A Linear Multisector Model of “Endogenous” Growth and the Problem of Capital

In this paper a linear multisector model of “endogenous” growth with heterogeneous capital goods is elaborated. The purpose of this exercise is to show that this kind of model is exempt from the capital theory critique put forward against the conventional long-period neoclassical growth model á la Solow. This confirms previous claims that at least some of the “new” growth models are somewhat extraneous to neoclassical analysis and actually exhibit the logical structure of classical theory. In addition it is shown that the use of an intertemporal analysis to establish a correct long-period position is not necessary and that the use of the long-period method may speed up the elaboration of new scientific results.     

The dynamics of fiscal policy in an open economy

This paper extends the work of Blinder and Solow, analyzing the dynamics of fiscal policy, to a small open economy having a fixed exchange rate. The model is developed under the assumption that domestic and foreign bonds are imperfect substitutes. The stationary properties of this system are discussed and it is shown how, in general, equilibrium requires both the government budget to be balanced and the balance of payments on current account to be in equilibrium. The stability of the system is analyzed under two extreme assumptions: zero capital mobility and perfect capital mobility. A significant result of the analysis is to show how the appropriate choice of the policy parameters, describing the mode of deficit financing and sterilization policies, is of central importance to the stability of the model.     

Optimal Utilization of Capital and a Financial Sector in a Classical Gravitation Process

In a production price framework, a two‐sectoral gravitation process with cross‐over adjustments of prices and quantities is advanced. To overcome an inconsistency in the treatment of fixed capital in disequilibrium, the socio‐technological input coefficients are assumed to vary with the sectoral output–capital ratio, such that for each relative price there exists an optimal degree of capital utilization which maximizes the sectoral rate of profit. Production prices prevail if these maximizing rates of profit are equalized. In addition, a financial sector determining the rate of interest is incorporated into the model. The mathematical analysis establishes a broad scope for local stability of the long‐run equilibrium position once a condition applies that ensures stability of the output adjustments in the short period.     

Rhetorics of saving–investment correlations and the international mobility of capital: A survey

This study surveys the literature on saving–investment (SI) correlations and international mobility of capital (IMC) generated over more than three decades since the 1980s. Several studies have shown the presence of paradoxically high SI correlations for the developed countries with observed high IMC, and low SI correlations for the developing countries with observed low IMC. The studies accounting for structural breaks in model parameters provide dominant support for the decrease in SI correlations and increase in IMC after the switch from fixed to flexible exchange rate regime and the removal of policy restrictions on capital flows. The intertemporal optimisation approach to current account and the open-economy growth and dynamic stochastic general equilibrium models mainly provide theoretical predictions and suggest that it is possible to find high SI correlations in the wake of high IMC. The increases in international capital flows have been the natural corollary of the growth of international trade in goods and services and increases in foreign direct investment flows. It is these factors, rather than international trade in capital market securities (bonds and equities) driven by the diversification benefits of financial portfolios per se, that have been the key levers of international financial flows.     

2006年诺贝尔经济学奖得主菲尔普斯理论评介

本文介绍了2006年诺贝尔经济学奖得主埃德蒙.菲尔普斯的主要理论贡献。他在宏观经济政策跨期权衡分析、“黄金律”与经济增长、宏观经济政策的“短期—长期”分析、“自然率”、构建宏观经济学的微观基础,以及结构性萧条与繁荣等诸多领域进行了开创性的研究。菲尔普斯的理论和主张对西方经济理论和经济政策的研究都有十分重大的影响。     

A Discrete‐Time Intertemporal Asset Pricing Model: GE Approach with Recursive Utility

This paper studies the equilibrium characterization of asset pricing in a discrete‐time Lucas exchange economy (Lucas 1978) with the intertemporal recursive utility function of Epstein and Zin (1989). A general formulation of equilibrium asset pricing is presented. It is shown that risk aversion of a certainty equivalent corresponds to risk aversion in the intertemporal asset pricing model. The discrete‐time analogue of Ma's (1993) option pricing formula is derived in an i.i.d. environment, with which we prove an observational nonequivalence theorem in distinguishing the differences of the betweenness recursive utility functions and the expected utility functions. Additionally, when the consumption growth rate follows a first-order Markov process, it is shown that the observational nonequivalence result holds for Kreps–Porteus expected utility. Finally, as by-products, this paper also contains derivations of closed-form formulas for the aggregate equity (with endogenously determined yields), the term structure of interest rates, and European call options on the aggregate equity in a Markov setting.     

On the connections between intra-temporal and intertemporal trades

This paper develops a new theory of international economics by introducing Heckscher–Ohlin features of intra-temporal trade into an intertemporal trade approach of current account. To do so, we consider a dynamic general equilibrium model with tradable sectors of different factor intensities, which allows for substitution between intertemporal trade (current account adjustment) and intra-temporal trade (goods trade). An economy's response to a shock generally involves a combination of a change in the composition of goods trade and a change in the current account. Flexible factor markets reduce the need for the current account to adjust. On the other hand, the more rigid the factor markets, the larger the size of current account adjustment relative to the volume of goods trade, and the slower the speed of adjustment of the current account towards its long-run equilibrium. We present empirical evidence consistent with the theory.     

MONETARY POLICY WITH INVESTMENT–SAVING IMBALANCES

Financial instability is the new challenge for monetary policy. Most studies indicate that financial crises follow prolonged unwinding of investment–saving imbalances (ISI). These phenomena are not contemplated by the standard theoretical framework of continuous intertemporal equilibrium. This paper's aim is to take a first step into the analysis of monetary policy in the context of ISI. First, a dynamic model of a flex‐price, competitive economy is presented where ISI are allowed to develop. Second, upon introducing different types of Taylor rules, some indications for the conduct of monetary policy emerge, which are at variance with the standard view.     

Intellectual Capital and the New Wealth of Nations II

In the second part of his analysis of intellectual capital and the issues it raises for managers, the author concentrates on the distinction between intellectual capital and human capital. In particular, he argues that intellectual capital is far more important than human capital in economic growth, the creation of wealth and competitive advantage. He concludes with a discussion of why business education has not made intellectual capital central to its curriculum despite its importance.     

Tariffs,non-traded goods and fiscal policy

This paper considers the effects of tariffs in a framework that explicitly accounts for the intertemporal nature of the current account. In particular, the paper shows how tariffs alter the domestic real interest rate, thereby influencing the optimal paths of consumption, saving, and the current account. By emphasizing the distinction between home goods and traded goods for a small open economy, the analysis highlights the important role of the real exchange rate in determining macroeconomic equilibrium. This paper also demonstrates the crucial importance of assumptions about the type of government fiscal policies accompanying a tariff.