Money and Prices Under Uncertainty

We study whether monetary economies display nominal indeterminacy: equivalently, whether monetary policy determines the path of prices under uncertainty. In a simple, stochastic, cash-in-advance economy, we find that indeterminacy arises and is characterized by the initial price level and a probability measure associated with state-contingent nominal bonds: equivalently, monetary policy determines an average, but not the distribution of inflation across realizations of uncertainty. The result does not derive from the stability of the deterministic steady state and is not affected essentially by price stickiness. Nominal indeterminacy may affect real allocations in cases we identify. Our characterization applies to stochastic monetary models in general, and it permits a unified treatment of the determinants of paths of inflation.     

Monetary policy with sticky prices and segmented markets

Summary. We consider a sticky-price model with segmented asset markets, and examine its implications for monetary policy. Our finding is, first, that the response of the money supply growth rate to a money demand shock required to stabilize inflation is not affected by the existence of a liquidity effect, but the response of the nominal interest rate is. Second, when the monetary authority adopts a Taylor rule, whether or not it should be active to obtain local determinacy of equilibria depends on the existence of a liquidity effect. Our results suggest that the monetary authority should be careful about the existence and the degree of a liquidity effect particularly when the nominal interest rate is used as the policy instrument.Received: 11 February 2004, Revised: 1 November 2004 JEL Classification Numbers: E3, E4, E5.     

Multiple influences on corporate governance practice in Nigeria: Agents,strategies and implications

The literature on the convergence of corporate governance systems across different institutional contexts has often taken the role of ‘agents of convergence’ for granted. Against this background, we examine the influences of three major agents – international organisations, rating agencies, and local institutions – on the development of corporate governance practices in Nigeria. Findings indicate that the understanding and practice of corporate governance in Nigeria are in a flux and being pulled in multiple directions by the agents studied. This paper provides one of the very few studies utilising sub-Saharan African (Nigerian) data in international business governance research.     

The residential demand for electricity in Japan: An examination using empirical panel analysis techniques

This paper examines the residential demand for electricity in Japan, excluding Okinawa-prefecture, from 1975 to 2005 as a function of the disposable income per household and the overall unit price of electricity for general consumers, by using the empirical panel analysis techniques of a panel unit root test, a panel cointegration test, and group-mean dynamic ordinary least squares (DOLS) estimators to determine whether or not each variable is stationary. This study's contribution is twofold. First, for a more accurate empirical economic analysis, it divides Japan into a number of regions so that the estimation of coefficients becomes more powerful due to the increased degree of freedom from the utilization of the panel data. Second, the study chose Japan for this analysis on the basis of discussions regarding the deregulation of the residential electric power supply that is scheduled for the near future. All variables—sales per household, price, and income per household—can be assumed to have a unit root and cointegration relationship. The results determine that the price effect is negative and elastic and that the income effect is inelastic. These results correspond to other such studies on developed countries that are significant economic powers.     

Factors affecting customers’ continued intentions to use Islamic banks

No study has concurrently verified the religious motives and attitudes that affected the customers’ continued intentions to use Islamic banks along with the importance of other factors and attributes associated with conventional banking services. This study examines factors affecting customers’ attitudes toward Islamic banks based on data obtained from interview surveys conducted in Jordan. The findings show that customers’ religious motives, their evaluations of a bank's compliance with Islamic law as an indication of the customers’ religious attitudes toward Islamic banks, and the ease of access to credit had a positive effect on the customers’ intentions to continue using Islamic banks. More specifically, the findings suggest that customers who continuously transact with Islamic banks more strongly emphasize religious attitudes, rather than credit constraints (such as the degree of access to credit) and religious motives. This study further reveals that religious attitudes, rather than mere religious motives, were the primary criterion for the customers’ continued intent to use Islamic banks, especially when considering the strong effect of their religious attitudes toward Islamic banks.

     

A SIMPLE MODEL OF KEYNESIAN UNEMPLOYMENT

This paper presents a general equilibrium model that extends a static New Keynesian framework to an overlapping generations model. The model shows multiple stationary states, one of which has the following strong Keynesian features: (1) a reduction in wages generates increased unemployment through a decrease in consumption, and (2) the fiscal multiplier is larger than unity and is increasing in the wage share in income.     

Commodity Spread Option with Cointegration

We derive the valuation formula of a European call option on the spread of two cointegrated commodity futures prices, based on the Gibson–Schwartz with cointegration (GSC) model. We also analyze the American commodity spread option including the early exercise premium representation and an analytical approximation valuation formulae with cointegration. In the numerical analysis, we compare the spread option values calculated by the GSC model and the Gibson–Schwartz (GS) model that ignores cointegration. Consistent with the intuition that the cointegration prevents the prices from diverging, the GSC model prices the commodity spread option lower than the GS model which have longer maturity of more than 6 years. In other words, the GS model may overprice the commodity spread options for those with longer maturity without taking account of cointegration. Thus, incorporating cointegration is important for valuation and hedging of long-term commodity spread options such as large scale oil refining plant developments.     

The natural yield curve: its concept and measurement

This paper illustrates the concept of the natural yield curve and how to measure it. The natural yield curve extends the idea of the natural rate of interest defined at a single maturity to one defined for all maturities. If the actual real yield curve matches the natural yield curve, the output gap will converge to zero. An empirical analysis using data for Japan shows that past monetary easing programs expanded the gap between the actual real yield curve and the natural yield curve mainly for short and medium maturities and led to accommodative financial conditions. By contrast, the quantitative and qualitative monetary easing policy has expanded the gap for long maturities as well as short and medium maturities. The natural yield curve is expected to provide a useful benchmark in the conduct of both conventional monetary policy and unconventional monetary policy aiming to influence the entire yield curve.     

Measuring economic localization: Evidence from Japanese firm-level data

This paper examines location patterns of Japan’s manufacturing industries using a unique firm-level dataset on the geographic location of firms. Following the point-pattern approach proposed by Duranton and Overman (2005), we find the following. First, about half of Japan’s manufacturing industries can be classified as localized and the number of localized industries is largest for a distance level of 40 km or less. Second, several industries in the textile mill products sector are among the most localized, which is similar to findings for the UK, suggesting that there exist common factors across countries determining the concentration of industrial activities. Third, the distribution of distances between entrant (exiting) firms and remaining firms is, in most industries, not significantly different from a random distribution. These results suggest that most industries in Japan neither become more localized nor more dispersed over time and are in line with similar findings by Duranton and Overman (2008) for the UK. Fourth, a comparison with the service sector indicates that the share of localized industries is higher in manufacturing than in services, although the extent of localization among the most localized manufacturing industries is smaller than that among the most localized service industries, including financial service industries.