Multiple equilibria arising from donor’s aid policy in economic development

This paper presents a neoclassical growth model comprising education and child labor with a focus on developing and aid-receiving countries to demonstrate cyclical growth and bifurcation in economic development. The appearance of multiple equilibria has often been attributed to the internal affairs of recipient countries, such as technology in production, subsistence minimum in consumption, and liquidity constraints in investment. The main argument of this paper is that the aid allocation policy employed by donor countries, thereby the motive of aid-providers, leads to divaricated and cyclical development in the recipient countries.     

Endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax

This paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Using a symmetric and two-region model of tax competition, where each region is allowed to choose either a unit or an ad valorem tax, we show that selecting a unit tax as a policy instrument is the dominant strategy.     

Shared Renewable Resources: Gains from Trade and Trade Policy

This paper examines the effects of international trade and trade policy in a two‐country, two‐good model with an open‐access renewable resource that is internationally shared. We show that both countries may still benefit from trade when they specialize in the production of their comparative advantage good, although the shared resource is reduced by trade. In addition, we demonstrate that the steady state utility of a resource‐good importing country may be reduced by trade, even if it specializes in the production of a non‐resource good. Import tariffs and export taxes on a resource good may increase or decrease the shared stock level depending on the production patterns in a trading steady state. The trade policy is likely to be Pareto‐improving when the shared stock rises, while both countries may be made worse off by the trade policy when the shared stock falls.     

Optimal Tariffs under a Revenue Constraint*

This paper examines the optimal tariff structure under a revenue constraint. When a fixed level of tax revenue has to be collected from the tariff alone, no adjustment in tariff rates can achieve an efficient resource allocation, even in a small open economy. Hence, the optimal tariff problem arises under a revenue constraint. We show that the revenue‐constrained optimal tariff structure is characterized by the following two rules: (i) the optimal tariff rate is lower for the import good that is a closer substitute for the export good, and (ii) the stronger the cross‐substitutability between imports, the closer the optimal tariff is to uniformity. This provides a theoretical explanation for the finding in empirical studies that the efficiency loss from a uniform tariff structure is negligible.     

Multiple equilibria and structural transition of non-monocentric urban configurations

A model of non-monocentric urban land use is presented, which requires neither employment nor residential location to be specified a priori. It is shown that the model is capable of yielding multicentric pattern as well as monocentric and dispersed patterns, and that the model generally yields multiple equilibria under each fixed set of parameter values. It is also shown that the city may undergo a catastrophic structural transition when the parameters take critical values.     

AMU Deviation Indicators for Coordinated Exchange Rate Policies in East Asia and their Relationships with Effective Exchange Rates

After the Asian currency crisis in 1997, the monetary authorities of East Asian countries have been strengthening their regional monetary cooperation. In this paper, we propose a deviation measurement for coordinated exchange rate policies in East Asia to enhance the monetary authorities’ surveillance process for their regional monetary cooperation. We calculate an Asian Monetary Unit (AMU) as a weighted average of East Asian currencies following the method used to calculate the European Currency Unit (ECU). Also, we calculate AMU Deviation Indicators which show how much each of the East Asian currencies deviates from a hypothetical benchmark rate in terms of the AMU. Furthermore, we investigate relationships between the AMU Deviation Indicators and the effective exchange rates, which mean international price competitiveness in terms of international trade. We found strong relationships between the AMU Deviation Indicators and the effective exchange rates except for some currencies. The results suggest that monitoring the AMU Deviation Indicator will be useful for the monetary authorities’ surveillance in East Asia in order to stabilise their effective exchange rate or price competitiveness among the East Asian countries.     

Stabilization of effective exchange rates under common currency basket systems

We investigate the extent to which a common currency basket peg would stabilize effective exchange rates of East Asian currencies. We use an AMU (Asian Monetary Unit), which is a weighted average of ASEAN10 plus 3 (Japan, China, and Korea) currencies, as a common currency basket to investigate the stabilization effects. We compare our results with another result on stabilization effects of the common G3 currency (the US dollar, the Japanese yen, and the euro) basket in the East Asian countries [Williamson, J., 2005, A currency basket for East Asia, not just China. In: Policy Briefs in International Economics, No. PB05-1. Institute for International Economics]. We obtained the following results: first, the AMU peg system would be more effective in reducing fluctuations of the effective exchange rates of East Asian currencies as a number of countries applied the AMU peg system increases in East Asia. Second, the AMU peg system would more effectively stabilize the effective exchange rates than a common G3 currency basket peg system for four (Indonesia, the Philippines, South Korea, and Thailand) of the seven countries. The results suggest that the AMU peg system would be useful for the East Asian countries whose trade weights on Japan are relatively higher than others. J. Japanese Int. Economies 20 (4) (2006) 590–611.     

Strategy switching in the Japanese stock market

This paper investigates the expectation formation process of Japanese stock market professionals. By utilizing a monthly forecast survey dataset on the TOPIX distributed by QUICK Corporation, we sort forecasters into buy-side and sell-side professionals. We empirically demonstrate that the buy-side and sell-side professionals use either fundamental or trend-following strategies throughout their expectation formation processes and that they switch between fundamental and trend-following strategies over time. We also discuss that strategy switching can be key in understanding the persistent deviation of the TOPIX from the fundamentals.     

The trade credit channel revisited: evidence from micro data of Japanese small firms

It is suggested that trade credit can be a substitute for bank loans for small- and medium-sized enterprises (SMEs) that have little access to external funding sources. Using unique cross-sectional survey data of Japanese SMEs, we conduct a deep investigation into the substitutability between bank loans and trade credit. This survey contains rich information on the suppliers of trade credit to SMEs, thus enabling the examination of the channel through which credit is provided from suppliers to customers. We find that SMEs with little access to bank credit depend more on large suppliers for trade credit. We also find that when a purchase is made from a large supplier, more credit is indeed provided in the form of trade credit. Furthermore, this channel of credit from large suppliers to SMEs is only observed for solvent customers, not for insolvent customers. Our findings suggest that trade credit plays an important role for entrepreneurial firms over the financial growth cycle. For young and small firms with little access to bank loans trade credit is an important funding source.     

Shared renewable resources and gains from trade under technology standards

Using a two‐country, two‐good model of international trade, we examine gains from trade and strategic interaction in resource management among countries that share renewable resources such as fishery stocks. Two goods are a resource good, which is the harvest of the shared stock, and some other good that may be thought of as manufactures. The productivity of the resource good depends on harvesting technology and the stock level. This paper focuses on technology standards (e.g., restrictions on fishing gears, vessels, areas, and time) over other methods for resource management because they are most commonly implemented in fisheries. Technology standards are modeled as a restriction on the harvesting technology; that is, under strict technology standards, firms exploit resources as if they are using inferior harvesting technology. We show that an opening up of trade may reduce the shared stock and cause steady‐state utility to decrease in a resource‐good importing country and increase in a resource‐good exporting country. Strikingly, when the shared stock is in jeopardy (a high demand for the harvest), steady‐state harvest is maximized after an opening up of trade by what we call multilateral resource management in this paper and both countries gain from trade.