A NOTE ON INVESTMENT DECISION RULES BASED ON UTILITY FUNCTIONS

Many investment decision models are formulated on the basis of certain assumptions regarding investor's tastes combined with the assumed objective of expected utility maximization. The rules are often expressed in the form of a finite number of moments of the returns distributions, depending on the specific utility function restrictions imposed. For example, mean/variance decisions have been derived using the assumption of a quadratic preference function. Borch (1969) and many others have demonstrated the ambiguity of mean/variance decision rules based on this specific utility functional form. In this note, Borch's findings are extended t o all investment decision rules based on the assumption of any finite order utility function for a general class of risk averters.     

Financial constraints,endogenous markups,and self-fulfilling equilibria

Self-fulfilling equilibria and indeterminacy can easily arise in a simple financial accelerator model with reasonable parameter calibrations and without increasing returns in production. A key feature for generating indeterminacy in our model is the countercyclical markup due to the procyclical loan-to-output ratio. We illustrate, via simulations, that our financial accelerator model can generate rich business cycle dynamics, including hump-shaped output in response to demand shocks as well as autocorrelation in output growth rates.     

Employment Status Persistence in the Japanese Labour Market

The growth of non‐standard employment has become a cause for concern for policy‐makers trying to boost output and keep unemployment low while also maintaining job security. This paper estimates a dynamic unobserved effects model using the Keio Household Panel Survey, an individual‐level panel data set, to investigate the effects on future employment opportunities of employment in Japan's non‐standard employment and regular employment sectors. I find strong evidence of persistence within the labour market, suggesting that past employment experience has a significant impact on future labour market outcomes.     

The hopf bifurcation and the existence and stability of closed orbits in multisector models of optimal economic growth

It is shown that under very general circumstances, the standard optimal growth model with two or more capital goods can give rise to optimal trajectories that are limit cycles. An example with a nonjoint production Cobb-Douglass technology giving rise to closed cycles around a unique steady state is constructed. The stability of orbits is also studied.     

Pareto vs. Wicksell on adjustment costs in consumption: A reformulation

Pareto's adjustment cost model generating cyclical consumption patterns and Wicksell's observation that it contains mathematical errors are analyzed. An alternative model capturing the essence of Pareto's model and meeting Wicksell's criticisms is proposed where it is shown that consumption and leisure patterns may be cyclical over time.     

The design of monetary and fiscal policy: A global perspective

We study the emergence of multiple equilibria in models with capital and bonds under various monetary and fiscal policies. We show that the presence of capital is indeed another independent source of local and global multiplicities, even under active policies that yield local determinacy. We also show how a very similar mechanism generates multiplicities in models with bonds and distortionary taxation. We then explore the design of monetary policies that avoid multiple equilibria. We show that interest rate policies that respond to the output gap, while potentially a source of significant inefficiencies, may be effective in preventing multiple equilibria and costly oscillatory equilibrium dynamics.     

Does risk management matter? Evidence from the U.S. agricultural industry

This article constructs triple-difference tests around shifts in the supply of risk management instruments available to agricultural producers to reveal a positive relation between risk management and productivity. This relation is more robust when producers adopt instruments with payoffs linked to group performance and weaker when payoffs are linked to individual performance. Additionally, productivity is particularly high among risk-managing producers in counties containing high levels of bank deposits, a proxy for access to finance. Overall, this article illuminates the relation between hedging and real firm outcomes as well as the interaction between access to finance and firms' risk management choices.     

The Role of Financial Development in Growth and Investment

Thisarticle decomposes the well-documented relationship between financialdevelopment and growth. We examine whether financial developmentaffects growth solely through its contribution to growth in ``primitives' or factor accumulation rates or whether it alsohas a positive impact on total factor productivity growth. Ourresults suggest that indicators of financial development arecorrelated with both total factor productivity growth and investment.However, the indicators that are correlated with total factorproductivity growth differ from those that encourage investment.In addition, many of the results are sensitive to the inclusionof country fixed effects, which may indicate that the financialdevelopment indicators are proxying for broader country characteristics.