The estimation of monetary policy reaction function in a data-rich environment: The case of Japan

This paper reports the estimates of a monetary policy reaction function for the Bank of Japan in a data-rich environment. There are two main findings. First, a weak identification problem arises in the estimates under the specifications that some previous works employ, though in a data-rich environment it may be possible to avoid this problem. Second, the evidence from the estimates in a data-rich environment suggests that the Bank of Japan only controlled the inflation forecast, and placed no weight on output stabilization directly over the period from November 1988 through February 2001.     

License and Entry Strategies for an Outside Innovator Under Duopoly with Combination of Royalty and Fixed Fee

We consider a choice of options for an innovating firm to enter the market with or without licensing its new cost-reducing technology to an incumbent firm using a combination of royalty and fixed license fee, or to license its technology without entry. When the innovating firm licenses its technology to the incumbent firm without entry, the optimal royalty rate for the innovating firm is zero. When the innovating firm enters the market with a license, its optimal royalty rate is positive. In that case if cost functions are concave, the optimal royalty rate is one such that the incumbent firm drops out of the market with negative fixed fee, and license without entry strategy and entry with license strategy are optimal; if cost functions are strictly convex, there is an internal solution of positive optimal royalty rate with positive or negative fixed fee and entry with license strategy is optimal.     

Competitiveness and Subsidy or Tax Policy for New Technology Adoption in Duopoly

We consider a problem of subsidy or tax policy for new technology adoption by duopolistic firms. The technology is developed in and transferred by a foreign country to the domestic country. It is free but each firm must expend some fixed set-up cost for education of its staff to adopt and use it. Assuming that each firm maximizes the weighted average of absolute and relative profits, we examine the relationship between competitiveness and subsidy or tax policies for technology adoption, and show that when firm behavior is not competitive (the weight on the relative profit is small), the optimal policy of the government may be taxation; when firm behavior is competitive (the weight on the relative profit is large), the optimal policy is subsidization or inaction and not taxation. However, if firm behavior is extremely competitive (close to perfect competition), taxation case re-emerges.