THE ROLE OF TECHNOLOGY AND NONTECHNOLOGY SHOCKS IN BUSINESS CYCLES*

This article proposes a method to identify technology and nontechnology shocks that permanently affect labor productivity and applies this method to data for the G7 countries. In most cases, whereas technology improvements have negative or weak effects on hours worked, positive permanent nontechnology shocks are expansionary. Permanent nontechnology shocks play an important role in business cycles, particularly in the United States and Japan, and account for 71% of a large reduction in Japan's detrended output from 1991 to 2002. Credit conditions are likely to be an important driver of variations in permanent nontechnology shocks.     

Fiscal policy switching in Japan, the US, and the UK

This paper estimates fiscal policy feedback rules in Japan, the United States, and the United Kingdom for more than a century, allowing for stochastic regime changes. Estimating a Markov-switching model by the Bayesian method, we find the following: First, the Japanese data clearly reject the view that the fiscal policy regime is fixed, i.e., that the Japanese government adopted a Ricardian or a non-Ricardian regime throughout the entire period. Instead, our results indicate a stochastic switch of the debt-GDP ratio between stationary and nonstationary processes, and thus a stochastic switch between Ricardian and non-Ricardian regimes. Second, our simulation exercises using the estimated parameters and transition probabilities do not necessarily reject the possibility that the debt-GDP ratio may be nonstationary even in the long run (i.e., globally nonstationary). Third, the Japanese result is in sharp contrast with the results for the US and the UK which indicate that in these countries the government’s fiscal behavior is consistently characterized by Ricardian policy.     

Micro Price Dynamics during Japan's Lost Decades

We study micro price dynamics and their macroeconomic implications using daily scanner data from 1988 to 2013. We provide five facts. First, posted prices in Japan are ten times as flexible as those in the US scanner data. Second, regular prices are almost as flexible as those in the USA and Euro area. Third, the heterogeneity of frequency and size of price change across products is sizable and maintained throughout the sample period. Fourth, during Japan's lost decades, temporary sales have played an increasingly important role in households' consumption expenditure. Fifth, the frequency of upward regular price revisions and the frequency of sales are significantly correlated with the macroeconomic environment, in particular indicators associated with a labor market, while other components of price changes are not.     

Institutional elasticity as a significant driver of IT functionality development

Institutions drive innovation and stimulate broad diffusion. Not surprisingly, national systems of innovation are influenced by their institutional flexibility in response to changing market conditions. As nations move from industrial to information-based societies, a key factor governing institutional “elasticity” is how institutions integrate information technology (IT). Since IT functionality is intimately connected with institutional dynamics, unlike simple manufactured products such as refrigerators, IT's specific functionality is formed through dynamic interaction with institutional systems. Consequently, institutional elasticity is a critical factor in the functionality of IT and its subsequent self-propagating behavior.This paper analyzes the mechanism of IT functionality development, with special attention to the interaction of the technology with institutional systems.     

Value Co-Creation in Business-to-Business and Business-to-Consumer Service Relationships

Abstract

The purpose of this study is to examine the interrelationships among value co-creation, switching costs (SC), and customer share (CS) in both business-to-business (B2B) and business-to-consumer (B2C) relationships. In spite of increasing attention to value co-creation in the Service Dominant Logic, there are only a limited number of empirical studies on this concept. Furthermore, few researchers have investigated the inter-relationship among value co-creation, SC, and CS in a single framework for both B2B and B2C relationships, although many enterprises serve both types of customers. The conceptual framework is developed primarily based on relationship marketing and services marketing. This study evaluates six hypotheses, analyzing survey data from 209 enterprises and 337 individuals by structural equation modeling (SEM). Further, confirmatory factor analysis (CFA) is conducted to confirm the convergent validity and discriminant validity. In conclusion, the positive impact of execution of value co-creation (EVC) activities on SC and CS is supported with appropriate statistical evidence in both B2B and B2C relationships. Also, the causal relationship between values in relational exchanges (VRE) and CS is confirmed with adequate empirical findings for both relationships. These results suggest to marketing managers that service firms may achieve larger CS by executing value co-creation activities and providing VRE for customers.     

Applications of Gram–Charlier expansion and bond moments for pricing of interest rates and credit risk

The purpose of this paper is to demonstrate the powerful and flexible applicability of the Gram–Charlier expansion to pricing of a wide variety of interest rate related products involving interest rate risk and credit risk. In this paper, we develop easily implemented approximations of the prices of several derivatives; swaptions, CMS, CMS options, and vulnerable options. Associated with the default risk, a survival contingent forward measure is constructed.     

A choice of auction format in seller cheating: a signaling game analysis

In this paper, we examine which auction format, first-price or second-price, a seller will choose when he can profitably cheat in a second price auction by observing all bids by possible buyers and submitting a shill bid as pretending to be a buyer. We model this choice of auction format in seller cheating as a signaling game in which the buyers may regard the selection of a second price auction by the seller as a signal that he is a shill bidder. By introducing trembling-hand perfectness as a refinement of signaling equilibrium, we find two possible strictly perfect signaling equilibria. One is a separating equilibrium in which a noncheating honest seller selects a first price auction and a cheating seller does a second price auction. In another pooling equilibrium, however, both cheating and non-cheating sellers select a second price auction. The conclusion that a seller chooses a second price auction even if he cannot cheat is in contrast to the previous literature, which focused on the case of independent values. We thank an anonymous referee for useful comments that have improved the paper. This research was partially supported by the Ministry of Education, Science, Sports and Culture, Grant-in-Aid for Scientific Research (B) 15310023 and (C) 18530139.     

Ministerial Weights and Government Formation: Estimation Using a Bargaining Model

This article proposes a method to estimate relative ministerialweights in parliamentary democracies. Specifically, we presenta bargaining model of government formation and estimate structuralparameters of the model using data for (i) who the formateursare, (ii) what each party's voting weight is, and (iii) whatministerial seats each party obtains. We also measure the effectsof voting weights and formateur advantage on bargaining results.We apply our proposed method to the case of Japan. Our estimationresults show that political players value pork-related posts(such as the Minister of Construction) much more than prestigiousones (such as the Minister of Foreign Affairs). We also findthat there is a significant formateur advantage, whereas votingweights do not have a significant scale effect, which is consistentwith the findings for European democracies.