Investment Literacy and Individual Investor Biases: Survey Evidence in the Japanese Stock Market

In this paper, we analyzed the results of our survey on Japanese stock investor’s asset risk management and empirically examined the effect of their investment literacy on their decision-making biases. This paper revealed that the higher the investors’ investment literacy, the lower their overconfidence bias. This suggests that high investment literacy can prevent investors from being influenced by an overconfidence bias and consequently making biased decisions in investment. Therefore, efforts to improve investors’ investment literacy by enhancing social systems such as investment education could be beneficial in guiding investors to make unbiased investment decisions.     

Growth Effects of Bubbles in an Endogenous Growth Model

This paper examines the possibility of the existence of bubbles and their effects on the growth rate by using an endogenous growth model. A necessary and sufficient condition for the existence of steady-state equilibrium with bubbles is provided. If non-zero rates of the useless asset supply are allowed, a steady-state equilibrium with bubbles exists even if the growth rate of the bubbleless equilibrium is lower than the market interest rate. The growth rate in the steady state with bubbles depends positively on the supply rate of the useless asset. Dynamic properties of bubbles are also analysed.
JEL Classification Numbers: E52, O41, O42.     

AN ECONOMIC POLICY HYPOTHESIS OF METROPOLITAN GROWTH CYCLES: A Reflection on the Recent Rejuvenation of Tokyo*

Rejecting the simplistic life-cycle hypothesis of cities put forth by Klassen and Paelinck, this paper advances a new hypothesis for the cyclical movements of urban growth that have taken place on a world-wide scale. The recent rejuvenation of major industrialized cities is largely attributed to the shift in the government's economic policies toward a smaller government, supported by the existence of economies of scale in large cities. The paper closely examines Tokyo's recent rejuvenation and shows how the government's conservative economic policies of the 1980's helped reverse the declining trend of the previous decade.     

Capital Flight, North-South Lending, and Stages of Economic Development

We present a two-country OLG economy in which international capital mobility exists in the presence of moral hazard in financial contracts. The difference in the extent of asymmetric information is a source of capital movement and capital flows from the South to the North. Even though there exists a unique steady state under autarky, multiple locally stable steady states may emerge in a world economy with an integrated capital market. However, the integration may drive the South down to further impoverishment. The South's government therefore should take into account seriously the timing of capital market liberalization as a conduit of economic development.     

Commodity Taxation and Economic Growth

We construct a variety expansion growth model following Grossman and Helpman (1991) and incorporate various groups of goods into the model. Each group has its own elasticity of substitution. We seek to determine the goods on which the government should impose higher rates of commodity tax in order to raise a certain amount of tax revenue. We thus reconsider the Ramsey Rule (the Inverse Elasticity Rule) in a growing economy.     

THE NUMBER OF FIRMS AND THE POLITICS OF STRATEGIC TRADE POLICY

Incorporating home firms' lobbying in a country into a third market model of oligopoly, this paper studies how such lobbying affects the government's strategic export policy scheme. We pay special attention to the home firms' lobby formation and its effect on domestic welfare. The home firms can organize a lobby more easily when the number of their rival foreign firms is larger than that of them, and/or when the government is overly concerned with political contribution relative to domestic welfare. The strategic export policy under lobbying cannot improve the domestic welfare, which depends on the number of firms, the government's concern about political donation and the level of socially wasted lobbying costs.     

The Choice of International Monetary Regimes in a Context of Repeated Games

A game theoretic and incentive approach is used to explain an international monetary regime. Decisions concerning a fixed exchange rate regime are difficult because they involve cooperation among participants, but decisions concerning defections from a fixed exchange rate regime are relatively easy because they are taken unilaterally. This may explain the difficulties for the completion of Economic and Monetary Union (EMU) in Europe well as the instability recently observed in the quasi-fixed exchange regimes of the Asian countries. EMU is now in full force. The perception of political benefits by national leaders has been the driving force of currency unification in Europe. The cost of a monetary union is the loss of monetary control by each participating nation. If countries cannot contain their desire to deviate from the common monetary expansion, then the currency could potentially be under speculative attack. After January 1, 1999, theoretically each EMU country can no longer deviate from the common norm; but the question remains how to implement this mode of conduct. Even the country in the center, Germany, may find a cost associated with the loss of its leadership role.