Deregulation, Integration, and Market Structure in European Banking

This paper analyzes the impact of deregulation and market integration policies on the structure of European banking markets. It argues that whether European integration will lead to large increases in EU-wide concentration will depend on the extent to which competition in banking is based on endogenous sunk costs or, alternatively, on variable costs and exogenous sunk costs. The paper also highlights the role of own funds as a source of endogenous increasing returns. Finally, it proposes an empirical test of the dominant form of competition. This procedure is applied to data for 11 EU countries during the period 1981–1995. J. Japan. Int. Econ., Dec. 1999, 13(4), pp. 372–396. IESE (International Graduate School of Management), University of Navarra, Av. Pearson 21, 08034 Barcelona, Spain. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: G20, G21.     

On the Role of Monetary Policy in a Deflationary Economy: The Case of Japan

In this paper we review the role of monetary policy for a country facing deflationary pressure based on the recent experience of the Japanese economy. We discuss economic background of inflation policy in Japan and analyze the impacts of the policy. We made simple calculations regarding how much the debt of selected companies and government can be reduced by mild inflation. Noting that the Fisher effect does not work perfectly under liquidity traps, the effect of inflation on debt issue appears quite large. To maintain controllable stable inflation, inflation targeting is a good candidate for the policy rule. J. Japan. Int. Econ., December 2000, 14(4), pp. 238–260. Graduate School of Economics, University of Tokyo, 7-3-1 Hongo, Bukyo-ku, Tokyo 113-0033, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E52, E58.     

Competition and productivity in Japanese manufacturing industries

This paper examines the determinants of productivity in Japanese manufacturing industries, looking particularly at the impact of product market competition on productivity. Using a newly available panel data on around ten thousand firms in Japanese manufacturing for the years 1994–2000, I show that competition, as measured by lower level of industrial price–cost margin, enhances productivity growth, controlling for a broad range of industrial and firm-specific characteristics. Moreover, I suggest that market power, as measured by either individual firm's price–cost margin or market share, has negative impact on productivity level of R & D performing firms. J. Japanese Int. Economies 19 (4) (2005) 586–616.     

Local and Global Competition in Information Technology

We examine the implications of changing competitive dynamics in global information and communications technology (ICT) markets for government demand-steering policies whose goal is local rents. Both computing and telephony are undergoing changes in global industry structure and changes in the nature of competition. The convergence of computing and telephony and the rapid technological change (and accompanying technological uncertainty) driving this convergence reinforce trends toward vertical competition. The emergence of global ICT markets lowers entry barriers, likely encouraging government-supported local entrants into global ICT markets. There are, however, strongly offsetting disadvantages. The underlying economics of ICT markets under vertical competition will work to reinforce the dominant position of U.S.-based incumbents in many segments. The prospects for exports, command of rent-related standards, and large rents from exports are not very bright. We expect to see far more demand-steering attempts than successes. J. Japan. Int. Econ., December 1999, 13(4), pp. 336–371. Landau Economics Building, Department of Economics-6072, Stanford, California 94305-6072; and International Computer Services Research, Stanford Computer Industry Project, Landau Economics Building, SIEPR 144, Stanford, California 94305-6016. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L5, F110.     

Economic Integration of Countries with International Public Goods

This paper develops a model of economic integration that is subject to random emergency costs. To mitigate the effects of these disruptions, each country that belongs to a club provides an international public good. This paper incorporates voluntary provision of public goods into a rigorous general equilibrium model of economic integration under uncertainty. It is shown that an increase in the probability of war or the penalty ratio in a club may raise the welfare and the size of the club if risk aversion with respect to private consumption is not so large. J. Japan. Int. Econ., December 1994, 8(4), pp. 530–550. Department of Economics, University of Tokyo, Hongo, Tokyo 113, Japan; and Department of Economics, Osaka University, Toyonaka, Osaka 560, Japan.     

New Goods, Market Formations, and Pitfalls of System Design

The standard practice in economic theory is to assume that all the relevant variables (e.g., the space of all the goods of potential economic value) and all the relevant constraints are known to the policymaker or to the designer of an economic system. This often unstated assumption (or the belief implicitly embodied in it) inadvertently creates an illusion about our ability to design an economic system and control process of resource allocation. In this paper, a series of examples is developed to illustrate that this modeling approach has the danger of misdirecting our attention when evaluating alternative forms of an economic system. Some implications for reforms in the former socialist economies are also drawn. J. Japan. Int. Econ., December 1995, 9(4), pp. 376–402. Department of Economics, Northwestern University, Evanston, Illinois 60208; NBER; and TCER.     

Unemployment and Labor Market Institutions: An Empirical Analysis

The development of the unemployment rate differs substantially between OECD countries. In this paper we investigate to what extent these differences are related to labor market institutions. In our analysis we use data of eighteen OECD countries over the period 1960–1994 and show that the way in which institutions interact is important. J. Japan. Int. Econ., December 2001, 15(4), pp. 403–418. Department of Economics, CentER, Tilburg University and Institute for Labour Studies (OSA), The Netherlands. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E24, J68.     

Government Deficit, Public Investment, and Public Capital in the Transition to an Aging Japan

This paper examines the effects of government deficits, public investment, and public capital on welfare in the transition to an aging Japan by applying a simulated general equilibrium growth model. One of the main results of this paper is that targeting only high economic growth would mislead us as to economic policies, and that a policy to reduce future government deficits is most preferable for almost all generations, even though a cut in future deficits must be followed by a decrease in public investment, thus a decrease in public capital in the future. J. Japan. Int. Econ., December 2002, 16(4), pp. 462–491. Faculty of Economics, Shiga University, Japan; and Management School, Imperial College, United Kingdom. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: H55, H54, H62, C68, J10.     

Terms of trade, catch-up, and home-market effect: The example of Japan

This paper explores theoretically and empirically the medium- and long-run relation of the terms of trade (ratio of traded goods prices) and economic growth of a pair of countries—one of which experiences a major catch-up process towards the other. Two theoretical interdependencies between the terms of trade and economic growth are offered: the home-market effect and the productivity-shock effect. These two effects are tested against each other in a cointegration analysis on data for Japan and the US from 1971 until 1997. Income is cointegrated with the terms of trade. The relevant empirical channel is the home-market effect. However, financial-market effects appear also to be relevant. J. Japanese Int. Economies 21 (4) (2007) 470–488.     

The industry origins of Japanese economic growth

This paper presents new data on the sources of growth for the Japanese economy over the period 1960–2000. The principal innovation is the incorporation of detailed information for individual industries, including those involved in the production of computers, communications equipment, and electronic components as information technology equipment. We show that economic growth is dominated by investments and productivity growth in information technology, both for individual industries and the economy as a whole. We also show that the revival of total factor productivity growth accounts for the modest resurgence of the Japanese economy since 1995. J. Japanese Int. Economies 19 (4) (2005) 482–542.     

Budgetary Consolidation in Europe: Quality, Economic Conditions, and Persistence

In this article we study the importance of the quality of fiscal adjustments and macroeconomic conditions for the persistence of budgetary consolidations. In contrast to previous work in this area, we do not arbitrarily predefine a measure of persistence to evaluate consolidation “success.” By employing duration analysis techniques, the length of a consolidation spell is rather determined endogenously. Our results based on a sample of industrialised OECD countries show that “consolidation fatigue” and the quality of fiscal consolidations are indeed important determinants of their longevity. Moreover, high debt–GDP ratio and fiscal tightening in other OECD countries raise the likelihood of consolidations to persist. Applying our results to European countries in the 1990s provides only weak evidence suggesting that the Maastricht process contributed much to the fiscal consolidations observed in Europe during the 1990s. J. Japan. Int. Econ., December 2002, 16(4), pp. 512–535. ZEI, University of Bonn, Bonn, Germany, Indiana University, Bloomington, Indiana; and CEPR; Strathclyde University, Glasgow, Scotland; and CEPR; and ECB, Kaiserstrasse 29, D-60311 Frankfurt a.M., Germany; and ZEI. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E61, E62, E65.     

Should We Be Afraid of Friedman's Rule?

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate H. L. Cole and N. Kocherlakota's (1998, Fed. Res. Bank Minn. Quart. Rev., Spring, 2–10) analysis of Friedman's rule: short run increases in the money stock—whether through issuing spending coupons, open market operations, or foreign exchange intervention—change nothing as long as the money stock shrinks in the long run. Second, two simple Keynesian models of the inflationary process with a zero lower bound on nomianl interest rates imply either that deflationary spirals should be common or that a policy close to the Friedman rule and thus some deflation is optimal. Finally, a formal baby-sitting coop model implies multiple equilibria, but does not support the injection of liquidity to restore the good equilibrium, in contrast to P. Krugman (1998, Slate, August 13). J. Japan. Int. Econ., December 2000, 14(4), pp. 261–303. CenER, Tilburg University; Humboldt University, Berlin, Germany; and CEPR Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E31, E41, E50, E51, E52.     

Determinants of Individual-Firm Markup in Japan: Market Concentration, Market Share, and FTC Regulations

This paper estimates individual firm level markup for more than 400 major manufacturing firms in Japan. Our estimates suggest the presence of significant market power for most of these firms, due not only to market concentration but also to the firms' own market shares, as well as advertizing and sales promotion efforts. The paper then goes on to assess systematically the impact on estimated markups of regulatory measures taken by the Fair Trade Commission (FTC) of the Japanese Government. We find that non-punitive FTC activities are directed toward the right targets and are reasonably effective, whereas injunctions, the strongest measure endowed to the FTC, has essentially no effect on the markups of firms in our sample. J. Japan. Int. Econ., Dec. 1999, 13(4), pp. 424–450. Institute of Economic Research, Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan; Institute for Social and Economic Research, Osaka University; and Faculty of Economics, University of Tokyo. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: L13, L41.     

The Relative Importance of Employer and Employee Effects on Compensation: A Comparison of France and the United States

Using individual data on compensation, matched with establishment and firm data on performance and inputs, we compare the French and American pay systems. The compensation measures are decomposed into components related to measured individual characteristics, establishment–enterprise effects, and a residual. In France, the compensation outcomes are more compressed than in the United States. For France, individual characteristics and establishment effects explain more of the variability in compensation outcomes than in the United States. The observable and unobservable components of compensation are identically correlated in the two countries. The relations among compensation components (individual and establishment) and firm performance outcomes (value-added per worker, sales per worker, and profit per unit of capital) exhibit some important similarities and differences between the countries. Higher paid workers, either because of individual characteristics or establishment effects, are employed in firms that are more productive. Higher pay due to enterprise heterogeneity is associated with higher profitability in France but lower profitability in the United States. J. Japan Int. Econ. December 2001, 15(4), pp. 419–436. Department of Labor Economics, Cornell University, 259 Ives Hall, Ithaca, New York 14853–3901, CREST and NBER; CREST-INSEE, 15, bd Gabriel Péri, 92245 Malakoff Cedex, France, CEPR and IZA; LAMIA-TEAM, Université de Paris 1 Panthéon-Sorbonne, 106–112, bd de l'Hôpital, 75647 Paris Cedex 13, France, and Crest; and Department of Economics, University of Missouri–Columbia, 118 Professional Bldg., Columbia, Missouri 65211. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J31, D21.     

Thinking About the Liquidity Trap

The phenomenon of the liquidity trap—defined as a situation in which even a zero interest rate is insufficiently low to produce full employment—has taken on new importance with the persistent slump in Japan. This paper restates recent theoretical work on liquidity traps, drawing a link between “intertemporal” models that are mainly concerned with demonstrating the underlying logic, and more ad hoc models that bear directly on policy; it then reexamines policy alternatives, including fiscal stimulus and inflation targeting. J. Japan. Int. Econ., December 2000, 14(4), pp. 221–237. Woodrow Wilson School, Princeton University, Princeton, New Jersey 08544-1013 Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E58, E31, F31.     

The Role of Monetary Policy in Japan: A Break in the 1990s?

This article documents time series evidence suggesting the case for a possible structural break in the role of Japan's monetary policy during the 1990s. It uses a simple vector autoregressive framework and offers some suggestive results: While a persistent effect of monetary policy on real output is detected over the full sample of 1975–1998 and the subsample that ends in 1993, such effect disappears with the recent subsample of the 1990s. The stability analysis also provides more specified evidence that there is a break in the reduced form dynamic system in 1995. Some interpretations are offered to intuitively support these findings. J. Japan. Int. Econ., December 2000, 14(4), pp. 366–384. Research Institute for Economics and Business Administration, Kobe University, Rokko, Nada, Kobe 657-8501, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E32.     

An Evolving Diversity of Organizational Mode and Its Implications for Transitional Economies

The paper constructs a theoretical framework for analyzing the comparative informational efficiency of five organizational modes, each modeled after an evolving diversity of a firm′s internal organization in market economies. It then discusses analytical implications for the organizational reform which may emerge within the ex-state-owned enterprise under evolutionary constraints of the transition, particularly under the tendency toward insider control. It is maintained that possible organizational reform hinges upon the coevolution of complementary ownership structure and financial monitoring mechanism. J. Japan. Int. Econ., December 1995, 9(4), pp. 330–353. Department of Economics, Stanford University, Stanford, California 94305.     

Competition in the Pay-TV Market

This paper discusses competition in the emerging pay-TV market. Economic features of the industry are described, and the current state of the market in the UK is summarized. Two simple formal models of the industry are analyzed: First the danger of two vertically integrated pay-TV networks entering into collusive agreements to exchange programming with each other is discussed; second, the private and social incentives for signing exclusive contracts for premium programming are analyzed. J. Japan. Int. Econ., December 1999, 13(4), pp. 257–280. Nuffield College, Oxford OX1 1NF, United Kingdom. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: D43, L13, L41, L82.     

Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher''s Commodity Points Revisited

We propose that analysis of purchasing power parity (PPP) and the law of one price should explicitly take into account the possibility of “commodity points”—thresholds delineating a region of no central tendency among relative prices, possibly due to lack of perfect arbitrage in the presence of transaction costs and uncertainty. More than 80 years ago, Heckscher stressed the importance of such incomplete arbitrage in the empirical application of PPP. We devise an econometric method to identify commodity points. Price adjustment is treated as a nonlinear process, and a threshold autoregression offers a parsimonious specification within which both thresholds and adjustment speeds are estimated by maximum likelihood methods. Our model performs well using post-1980 data, and yields parameter estimates that appear quite reasonable: adjustment outside the thresholds might imply half-lives of price deviations measured in months rather than years, and the thresholds correspond to popular rough estimates as to the order of magnitude of actual transport costs. The estimated commodity points appear to be positively related to objective measures of market segmentation, notably nominal exchange rate volatility.J. Japan Int. Econ.December 1997,11(4), pp. 441–479. Department of Economics, University of California, Berkeley, California 94720-3880; and Department of Economics, Northwestern University, Evanston, Illinois 60208-2600.     

Monetary Policy, Credit, and Real Activity: Evidence from the Balance Sheet of Japanese Firms

We analyze the mechanism of monetary transmission in the Japanese economy by using the quarterly time series data disaggregated by firm size. In particular we examine the channels through which monetary policy influences the firm's fixed investment with special focus on the firm's land. We estimate the vector autoregressive model where we encompass two competing hypotheses on the monetary transmission: monetary and credit channels. Our evidence is in support of the credit channel. We find that land has played a vital role in the monetary transmission, especially for small firms. Moreover, we find that fall of land value in 1990s weakened the efficacy of monetary policy considerably. J. Japan. Int. Econ., December 2000, 14(4), pp. 385–407. Institute of Social and Economic Research, Osaka University, Osaka, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E22, E32, E44, E51.