Social value of public information re-examined

As an extension of Hirshleifer's horse race example into a competitive exchange market framework, this paper quantitatively re-examines the condition under which social value of public information can be positive. For a prototype economy of two risk averse traders, we prove that their discordance of beliefs makes the social value of a certain class of inconclusive information either positive or negative depending on whether their endowments are or are not predominantly associated with states they regard as more probable, whereas it has been known that information acquisition is always socially wasteful under concordant beliefs.     

Some cumulative logit models for panel-data analysis: an application to a dynamic analysis of personal efficacy

This paper introduces novel cumulative logit models for the panel-data analysis of transitions among ordered states of a polytomous dependent variable. The models differ from conventional cumulative logit models in that they can distinguish between covariate effects on the odds of having an upward transition and covariate effects on the odds of having a downward transition in the ordered states of the dependent variable. The new models are applied to panel data on personal efficacy and are used to identify asymmetric patterns in the effects of divorce and unemployment on changes in the level of personal efficacy. The effects of the two events on increasing the odds of having a downward transition are shown to be greater than their effects on decreasing the odds of having an upward transition. Some distinct characteristics of the effects of each event are also reported.     

Sunspots and Hopf bifurcations in continuous time endogenous growth models

First we treat a three-dimensional continuous time abstract stationary model that includes one predetermined variable and two non-predetermined variables. We construct stationary sunspot equilibria in this model under the following two alternative conditions: (i) a steady state has two stable roots and one unstable root; and (ii) A closed orbit has a two-dimensional manifold on which it is asymptotically stable. Next, we apply these results to the models due to Lucas and Romer that undergo Hopf bifurcations for some parameter values. We construct sunspot equilibria in these models.     

INTERTEMPORAL COMPLEMENTARITY AND OPTIMALITY: A STUDY OF A TWO‐DIMENSIONAL DYNAMICAL SYSTEM*

We study the underlying structure of the two‐dimensional dynamical system generated by a class of dynamic optimization models that allow for intertemporal complementarity between adjacent periods, but preserve the time‐additively separable framework of Ramsey models. Specifically, we identify conditions under which the results of the traditional Ramsey‐type theory are preserved even when the intertemporal independence assumption is relaxed. Local analysis of this theme has been presented by Samuelson (Western Economic Journal 9 (1971), 21–26). We establish global convergence results and relate them to the local analysis, by using the mathematical theory of two‐dimensional dynamical systems. We also relate the local stability property of the stationary optimal stock to the differentiability of the optimal policy function near the stationary optimal stock, by using the Stable Manifold Theorem.     

An analysis of the intra-firm sales activities of Japanese multinational enterprises in the United States: 1977 to 1989

This paper examines the activities of the largest Japanese multinational enterprises (MNEs) operating in the United States by looking at data on exports, imports, and intra-firm trade between the Japanese subsidiaries in the United States and their parent and other foreign groups. It also examines how much of the domestic sales in the United States are accounted for by local production of the Japanese subsidiaries. Sales data provide an indication of the advantages of being multinational, which are mirrored in the growth of the post-investment sales of overseas units (both manufacturing and non-manufacturing). Data on the flows and stocks of foreign direct investment (FDI) represent the initial decisions to undertake FDI and largely ignore the learning effects of having overseas production.The authors are from the City University of Hong Kong and NORTACK Software Limited. We would like to thank the Editor, Dr Leung Hing-Man, the anonymous referees, and Don Daly, Wendy Dobson, Hiroaki Izumi, Terutomo Ozawa, Alan M Rugman and Rob Tran for their helpful comments. All errors and omissions, however, remain the responsibility of the authors.     

Intertemporally dependent preferences and optimal dynamic behavior

We study a model of optimal dynamic behavior in which the intertemoral preferences preserve the time additively separable framework of Ramsey models, while exhibiting Edgeworth–Pareto complementarity between consumption in adjacent periods. We identify economic environments in which global optimal dynamics under intertemporal complementarity exhibits persistent fluctuations even though the misspecified Ramsey-type theory, under the intertemporal independence assumption, predicts monotone convergence.     

Monetary Transmission and Inventory: Evidence from Japanese Balance-Sheet Data by Firm Size

I analyse the response of inventories and short-term debts to monetary policy using disaggregated data on Japanese manufacturing firms classified by firm size. I find that monetary contraction decreases the inventories of large firms; however, inventories of small and medium firms increase considerably for the first several quarters. This implies that in a subcontracting system small and medium subcontractors serve as a buffer and alleviate the monetary shocks felt by their large parent firms. Moreover, inventory build-ups are financed by increases in accounts payable. I also find that for small firms land asset is important in easing credit conditions and increasing inventories.
JEL Classification Numbers: E22, E32, E44, E51.     

Optimal chaos,nonlinearity and feasibility conditions

Summary This study constructs a class of dynamic models in which optimal paths are generated by nonlinear transition functions similar to a tent map. We provide a sufficient condition under which such a transition function is a chaotic map. This characterization provides a way to construct complex nonlinear dynamics in a broad range of dynamic economic models.We would like to thank Michele Boldrin, William Brock, Richard Day, Mukul Majumdar, Lionel McKenzie, Tapan Mitra, Luigi Montrucchio, Jose Scheinkman, Rangarajan Sundaram and the referees for comments and discussions.     

Time preference and international trade

We first consider a closed model, where households' time discount depends on externality in consumption. We can prove that there is a unique steady state, which is a saddle point. Then we extend the model to a two‐country world, and derive the condition on the effects of consumption externality under which there is a unique free trade steady state with saddle‐point stability.