Exchange rates,price levels,and inflation targeting: Evidence from Asian countries

This study examines how the adoption of inflation-targeting influenced exchange rate pass-through and volatility in four Asian countries –Indonesia, South Korea, the Philippines, and Thailand – over the sample period of January 1990 to June 2007. We find that adopting inflation targeting helped reduce pass-through in South Korea, and Thailand, while the results are less clear for Indonesia and the Philippines. Nevertheless, the findings indicate that inflation targeting caused a decline in exchange rate volatility in all four countries. The important lesson from the experiences of these Asian countries is that the adoption of inflation targeting contributes to achieving the ultimate goal of inflation stability through reducing exchange rate pass-through or variability.     

Trade imbalances and harmonization of competition policies

The present study constructs a game in which the two countries strategically set competition policies in their respective non-tradable service sectors. These policies affect the countries’ utilities through the presence of trade imbalances. We demonstrate that in the presence of persisting trade imbalances, in a Nash equilibrium, the trade-deficit country maintains perfect competition while the trade-surplus country restricts competition. This shows it highly difficult to harmonize their policies to achieve the first best state under the current international trade regime, which is centered around the principle of reciprocity.     

The demand for accounting information: young NASDAQ listings versus S&P 500 NYSE listings

The main purpose of this paper is to examine accounting information which can be of poor quality for some industries because uniform regulation applies to all. However, there is a strong demand for reliable accounting data even when the quality of the data is poor. Consistent with this premise, I show that among young NASDAQ listings the valuation coefficient on BVE is higher and that on earnings is not lower for intangible-intensive ventures than for other firms. I also show that GAAP OCF provides additional information that enhances the quality of earning information. This results in a shift in valuation weight from BVE to earnings for intangible-intensive young NASDAQ listings. However, these phenomena do not appear for intangible-intensive S&P 500 firms listed on NYSE. My results suggest that variations in the demand for reliable financial data affect the valuation coefficients on earnings and BVE.     

HISTORY‐DEPENDENT PATHS AND TRADE GAINS IN A SMALL OPEN ECONOMY WITH A PUBLIC INTERMEDIATE GOOD*

This study reexamines McMillan's (International Economic Review 19 (1978), 665–78) analysis of a dynamic small open economy with a public intermediate good. Concerning the trade patterns of the open economy, we find results that were overlooked in McMillan's analysis. Among others, if labor endowment is of intermediate size, there are two saddle‐point steady states, and the initial stock of the public good determines the long‐run trade pattern. We also add a gains‐from‐trade analysis to McMillan's model and demonstrate that if the economy has a comparative advantage in a good with productivity less sensitive to the public intermediate good, the economy may lose from trade at the steady state.     

Foreign Direct Investment, Human Capital and Environmental Pollution in China

By using provincial socioeconomic and environmental data, this paper examines the relationship between human capital, FDI and pollution emissions in China. The result shows the impact of FDI on pollution emission is highly dependent on the level of human capital. FDI is negatively associated with pollution emissions in provinces with the higher levels of human capital, whereas FDI is positively related to pollution emissions in provinces with the lower levels of human capital. This suggests that pollution haven hypothesis (PHH) holds only in those provinces with low human capital. This study also finds that the sign of FDI’s effect on each pollutant’ emission requires the different threshold level of human capital, which may help to reconcile the current conflicting PHH empirical evidences partially.     

AN INDUSTRIOUS REVOLUTION IN AN EAST ASIAN MARKET ECONOMY? TOKUGAWA JAPAN AND IMPLICATIONS FOR THE GREAT DIVERGENCE

This paper addresses a question raised by Jan de Vries' on the relationship between industriousness and the rise of the market in East Asia. Was the growing industriousness in Tokugawa Japan, as de Vries suggests, a substitute ‘for the absence of markets’? The examination refers to two versions of Chayanov's peasant farm model and their empirical relevance to the Tokugawa agrarian history, with special reference to the formation of labour‐intensive peasant farming (Akira Hayami's version of an industrious revolution), product specialisation, and the markets for production factors, land, and labour. Its implications for the Great Divergence debate are also discussed.     

International Trade with a Public Intermediate Good and the Gains from Trade*

This paper presents a one‐primary factor, two‐consumer good, and two‐country model of international trade where each country’s government supplies a country‐specific public intermediate good so as to attain efficient production. By introducing the Marshallian adjustment process, it is demonstrated that the country with larger factor endowment exports the good whose productivity is more sensitive to the public intermediate good. Our normative analysis of free trade shows the following results. First, at least one country gains from trade. Secondly, if a country incompletely specializes in the trading equilibrium, the country necessarily loses from trade.     

Interior Optimal Chaos with Arbitrarily Low Discount Rates

In this study, we demonstrate, for an arbitrarily small discount rate, the existence of a topologically chaotic policy function that lies in the interior of the technology set in a two-sector model with smooth production and utility functions. For this purpose, we adopt CES production functions and a utility function with a constant elasticity of intertemporal substitution. The two-sector model with those functions always has a policy function lying in the interior of the technology set (interior policy function). The existence of a scramble set of a policy function may be proved even in the case in which the discount rate is arbitrarily small.
JEL Classification Number: 041.