Does a central clearing counterparty reduce liquidity needs?

This study investigates whether and how central clearing influences the overall liquidity needs in a network of financial obligations. Utilizing the approach of flow network theory, we show that the effect of adding a central clearing counterparty (CCP) is decomposed into two effects: central routing, and central netting effects. Each effect can produce different liquidity needs according to different liquidity scenarios. The analysis indicates that adding a CCP in times of financial distress successfully reduces the overall liquidity needs if and only if the netting efficiency of the CCP is sufficiently high. Furthermore, once the economy is no longer in financial distress, higher netting efficiency of the CCP could conversely increase the overall liquidity needs. The results have implications for the effectiveness of CCPs in mitigating systemic risk in times of financial distress, and their operating costs once the distress has passed.     

Multimarket Linkages,Trade and the Productivity Puzzle

This paper examines the relationship between firms’ productivity improvement and the volume of exports, and shows that it can be sometimes negative, which seems to be an empirical puzzle. The key lies in that we simultaneously take into account intermediate retailers (i.e. vertically) and multimarket linkages (i.e. horizontally). With convex cost functions, when market conditions worsen, the manufacturer increases supply to the retailer who is larger or more efficient in trade cost.     

COMPETITIVENESS AND STABILITY OF COLLUSIVE BEHAVIOR

We investigate the relationship between the degree of competition and the stability of collusive behaviour, by introducing the element of relative performance in the objective functions of the firms. We show that an increase in the degree of competition destabilizes the collusion. This relation differs starkly in the standard symmetric Cournot and Bertrand duopoly models, with the former being more unstable than the latter.     

Role of linking mechanisms in multitask agency with hidden information

We investigate the adverse selection problem where a principal delegates multiple tasks to an agent. We characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) [20] that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. We show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. We also extend the results of the single-agent model to the multi-agent model.     

Financial Sector Risk and the Stock Returns: Evidence from Tokyo Stock Exchange Firms

We investigate whether the activity of financial firms creates value and/or risk to the economy within the asset pricing framework. We use stock return data from nonfinancial firms listed in the first section of the Tokyo Stock Exchange. The value-weighted index that is solely composed of nonfinancial firms is augmented with the index of the firms from the financial sector, and we estimate multivariate asset pricing model with these two indices. We note that our procedure can simultaneously take into account the cross-holding phenomena among Japanese firms, especially between the financial sector and the nonfinancial sector. Our augmented index model performs well both with cross-sectional Fama and MacBeth regression test and GMM test. Our two index model with additional Fama and French's HML factor can capture cross-sectional variations of the returns of sample portfolios better than the original Fama and French model can, when measured by Hansen and Jagannathan distance measure. We find that this additional new sector variable can be a substitute for Fama and French's size factor, but not related to the bond index return. This variable has similar factor characteristic as money supply growth or the term structure, but the latter variables contain more information than the former. Morever, our financial sector model helps explain the return and risk structure of Japanese firms during the so-called bubble period.     

Enhanced co-citation analysis using frameworks

The valuation of intangible assets, such as patents, has recently been considered an important technique for R&D strategies. This paper proposes a citation analysis as a method of valuation on patent clusters having patent networks. A citation analysis is a method that examines the value of a patent on the basis of the number of citations of references. In particular, a co-citation analysis is used for coupling patents as the patent cluster and valuating the patent cluster. While the co-citation analysis is of great interest as a method of valuation, this analysis has not been fully examined and does not define any framework for a technology transition and patent strategy. Therefore, in this paper, the conventional co-citation analysis for evaluating the patent clusters is enhanced and frameworks for the technology transition and patent strategy are proposed by analysing citation routes in a co-citation analysis.     

Role of honesty in full implementation

This paper introduces a new concept of full implementation that takes into account agents’ preferences for understanding how the process concerning honest reporting works. We assume that the agents have intrinsic preferences for honesty in the sense that they dislike the idea of lying when it does not influence their welfare but instead goes against the intention of the central planner. We show that the presence of such preferences functions in eliminating unwanted equilibria from the practical perspective, even if the degree of the preference for honesty is small. The mechanisms designed are detail free and involve only small fines.