A General Equilibrium Approach to the Nonequivalence of Tariffs and Quotas under International Duopoly

We examine the nonequivalence of tariffs and quotas under international duopoly in a simple general equilibrium trading model; in particular, we study the welfare effects of a change in regime from a tariff to a quota. We first show that the results established by our predecessors in a partial-equilibrium segmented domestic market model do not straightforwardly carry over to a general equilibrium context. We next extend the segmented domestic market model to an integrated world market model and re-examine the equivalence of tariffs and quotas as well as the welfare aspects of the change in the regime.     

Voluntary Export Restraints under Imperfect Competition

The paper studies the effects of a change in the level of voluntary export restraints (VERs) on the behavior of the domestic firm and on the welfare of the importing country. The author constructs a simple two‐country Cournot duopoly model in which each firm produces a homogeneous good at constant marginal cost. It is shown that the results obtained by predecessors based on linear demand, constant‐elasticity demand, strategic substitutes and so forth all emerge as special cases.     

Vertical Restraints and Market Access

This paper analyzes vertical restraints in relation to market access issues. In Section II we briefly review the recent three major trade conflicts between Japan and the USA in light of vertical restraints. In Section III we review the major policy lessons of the economics literature of vertical restraints, and analyze whether we need a special treatment for vertical restraints abroad for a market access reason. In Section IV we evaluate the policy options towards foreign foreclosure and suggest that nondiscriminatory application of foreign or home competition policy should be the mechanism to address such concern instead of trade policy actions such as voluntary import expansions.     

Economic Development in Asian Countries, and the Effectof Trade in Asia on Employment and Wages in Japan

There is a controversy in the USA and several European countries on whether or not an increase in imports in manufacturing goods from low-wage developing countries has major effects on employment and wages in industrialized countries. This paper examines the issue for Japanese imports, paying a particular attention to the effect of manufacturing imports from Asian countries on employment and wages in Japan. It is found that the effect has not been large to date, but that there could be negative effects on employment and, in particular, wages if imports from China and India were to increase substantially.     

Policy Uncertainty and Saving Attitude: Evidence from a Survey on Consumers

Uncertainty over the social security and tax system is often pointed out as a source of stagnant household consumption at the aggregate level. This study presents empirical evidence on this issue by using original survey data of Japanese individuals. The results indicate that individuals are highly uncertain over the future course of social security and tax policies. The policy uncertainty is associated with an orientation toward saving, and the relationship is stronger for low‐income individuals. These results suggest that improving long‐term predictability in the social security and tax system may contribute to weakening households' saving orientation.     

Geography and Demography: New Economic Geography With Endogenous Fertility

To explain the links between demographics and economic integration, we construct a new economic geography model with endogenous fertility. Labour mobility across regions results in more people flowing into highly populated regions, but lowers fertility rates there. Finally, regions are divided into one very large region with a higher real wage and another small region with a lower real wage, a higher fertility rate and a supply of workers to the large region. The population growth path resembles a logistic curve in the early phase, but population decreases in the last phase. Economic integration leads to population concentration and decreases population size.     

Hybrid estimators for small diffusion processes based on reduced data

We deal with the Bayes type estimators and the maximum likelihood type estimators of both drift and volatility parameters for small diffusion processes defined by stochastic differential equations with small perturbations from high frequency data. From the viewpoint of numerical analysis, initial Bayes type estimators for both drift and volatility parameters based on reduced data are required, and adaptive maximum likelihood type estimators with the initial Bayes type estimators, which are called hybrid estimators, are proposed. The asymptotic properties of the initial Bayes type estimators based on reduced data are derived and it is shown that the hybrid estimators have asymptotic normality and convergence of moments. Furthermore, a concrete example and simulation results are given.     

What Types of Policy Uncertainties Matter for Business?

This paper reports data from the author's original survey of Japanese companies concerning the distributions on subjective uncertainties over economic policies and their effects on business operations. Companies perceive uncertainty over the future course of certain economic policies, such as the social security system and international trade policy. Policy uncertainty regarding the tax system, trade policy and environmental policy can have substantial effects on managerial decisions, especially on equipment investment and overseas activities. According to the companies’ subjective probability distributions on their sales outlook, manufacturers face greater uncertainty than non‐manufacturing companies do. Uncertainty over economic policies substantially reduces the expected sales growth rate.     

Equilibrium preference free pricing of derivatives under the generalized beta distributions

This paper demonstrates that the risk neutral valuation relationship (RNVR) exists when the aggregate wealth and the underlying variable for derivatives follow a distribution from the family of transformed beta distributions. Specifically, the asset specific pricing kernel (ASPK) is solved for the generalized beta (GB) distribution class, which is extremely flexible to describe various shapes of underlying distributions. With the ASPK in hand, preference free call option formulas are obtained for rescaled and shifted beta distribution of the first kind (RSB1) and for the second kind (RSB2). These distributions include many well known important distributions as special cases. If the preference free formula does not exist under the GB distribution class, then the call price is shown to be numerically calculated without information of preference parameters once the spot price of the underlying is given.     

High-Frequency Trading,Liquidity Withdrawal,and the Breakdown of Conventions in Foreign Exchange Markets

Conventions, or “that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change” (Keynes 1936), play a central role in over-the-counter markets. For instance, by allowing expectations about the future to become more harmonized and orderly, they act as stabilizers for the provision of liquidity. Conventions might, of course, change at any time. Nonetheless, by being attached to the daily trading routine and/or integrated within the institutional structure, the confidence in their relevance and validity can be long-lasting. In the foreign exchange market, in particular, where prices are quoted to end-users on demand, market-making banks rely on a convention to quote prices to each other to maintain liquidity. However, the rise of algorithmic and high-frequency trading poses a practical as well as a theoretical challenge to such conventions. By reacting ultra-fast to new information, including to new limit orders submitted by others, markets largely populated with algorithmic traders have become susceptible to a withdrawal of liquidity at an unprecedented speed and scale. Using a high-frequency dataset provided by Electronic Broking Services (EBS), we investigate the process of liquidity withdrawal from the foreign exchange spot market. By doing so, we consider the crowding out of conventions associated with liquidity provision, traditionally upheld through mutual understanding among financial institutions – in other words, reciprocity and trust among humans.