Low Inflation,Pass-through,and a Discrete Inflation-targeting Framework for Monetary Policy in China

The performance of inflation in China over the past few decades has been remarkable. This paper characterizes the statistical nature of the inflation series in China over the past quarter of a century and presents an interesting scenario of large decline in inflation pass-through accompanied with low inflation since the end of the 1990s. How should monetary policy in China be conducted under these new economic conditions? We propose a discrete inflation-targeting framework for monetary policy,which is likely to be suitable for the regime of low inflation and inflation pass-through. The advantages and caveats of adopting such a framework are also discussed.     

Profit taxation and capital accumulation in a dynamic oligopoly model

We illustrate a differential oligopoly game using the capital accumulation dynamics à la Ramsey. We evaluate the effects of profit taxation, proving that there exists a tax rate yielding the same steady state social welfare as under social planning. Contrary to the static approach, our dynamic analysis shows that, in general, profit taxation affects firms’ decisions concerning capital accumulation and sales. In particular, it has pro-competitive effects provided that the extent of delegation is large enough (and conversely).     

Homoclinic bifurcation and global indeterminacy of equilibrium in a two-sector endogenous growth model

This paper considers an endogenous growth model that belongs to the same family as the Lucas model. In the Lucas model an external effect appears in the physical-goods sector, whereas in our model, it appears in the educational sector. In our model, this external effect yields multiple balanced growth paths. Our model undergoes a homoclinic bifurcation and exhibits global indeterminacy of equilibrium.     

Commitment and coordination in a dynamic game model of international economic policy-making

In this paper, we consider a dynamic game model of two identical countries. Policy-makers of both countries have quadratic intertemporal objective functions and want to stabilize domestic output, domestic inflation, and the real rate of exchange. We present different analytical and numerical solutions for this policy game. Noncooperative open-loop equilibria are interpreted as requiring unilateral commitment and policy-makers' credibility. Potential gains from cooperation are present, as the noncooperative equilibrium solutions are not Pareto-optimal. Under an information pattern that admits memory strategies, the possibility of obtaining cooperative results without coordination and commitment arises.