Consumption loans under uncertainty

A stationary equilibrium for a sequence of markets under uncertainty is defined as a stationary stochastic process of temporary market equilibria. The purpose of this paper is to apply this equilibrium concept to a consumption-loans model with stochastic resources. Given that agents live for only two periods, that resources are allocated independently and identically, and that traders make “admissible” consumption decisions, it is shown that the sequence of equilibrium trades on forward markets is a Markov chain. When this chain is strictly stationary with a unique invariant distribution, the sequence of markets is in stationary equilibrium. Using Gale's classification scheme, a strictly stationary chain exists for each type of economy (classical, Samuelson, mixed). Questions concerning convergence to the invariant distribution for each type of economy are addressed by determining when the chain satisfies various recurrence conditions.     

On the shape of the single-country and world commodity-substitution and factor-substitution surfaces under conditions of joint production

In recent years trade theorists have completed the task of specifying necessary and sufficient conditions for the single-country and world transformation surfaces to be locally of any assigned degree of flatness. However those conditions are relevant only if the technology is of the no-joint-products type. In the present note we derive necessary and sufficient conditions for the single-country and world transformation surfaces to be of any assigned degree of flatness under conditions of joint production; and we also obtain, as a by-product, necessary and sufficient conditions for the single-country and world equal-product surfaces to be of any assigned degree of flatness.     

Fiscal Policy in a Growing Economy with Financial Frictions and Firm Heterogeneity

This paper constructs a tractable model of endogenous growth with financial frictions and firm heterogeneity. We introduce factor income tax, consumption tax as well as the government consumption into the base model and explore the growth effect of fiscal policy. We show that from the qualitative perspective, the long‐run effects of fiscal actions in our model are similar to those obtained in the representative agent models. However, the quantitative impacts of fiscal policy on long‐run growth in our setting can be substantially different from those established in the model where agents are homogeneous and there is no financial frictions.     

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.     

Expectation-driven fluctuations and welfare loss under free trade in two-country models

This paper investigates the interlinkage in the business cycles based on expectation-driven fluctuations of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model with sector-specific externalities. We show that some country's expectation-driven fluctuations can spread throughout the world once trade opens even if the other country has determinacy under autarky. We thus prove that under free trade, globalization and market integration can have destabilizing effects on a country's competitive equilibrium. Finally, we characterize a configuration in which opening to international trade improves the stationary welfare at the world level but deteriorates the stationary welfare of the country that imports investment goods and exports consumption goods. We conclude that in opposition to the standard belief, international trade might not be beneficial to all trading partners in the long run.     

Log-quadratic models for the analysis of Guttman scales and their status correlates

This paper introduces a distinct log-linear approach to the analysis of correlates of Guttman-scale positions. I introduce new models, which are referred to as the log-quadratic models. The models are obtained by imposing certain structural constraints on specific quasi-independence models used by Goodman for the Guttman-scale analysis. The derivation of the models owes in part to early studies of Guttman and Suchman on the intensity of attitudes as a structural component of the Guttman scale. The log-quadratic models employ three important structural parameters that characterize (1) the extent of scalability, (2) the mean Guttman-scale position, and (3) the extent of polarization of scale-type response patterns. The third parameter may also be interpreted in certain cases as a measure of attitudinal intensity. These parameters can be used efficiently as dependent variables for a multinomial logit analysis with status covariates. An application examines the effects of region, occupational status, marital status, age cohort and sex on the patterns of responses to a set of questions about mistreatment by tax authorities. A comparison of results with the application of Schwartz's latent-class models to the same data is also made.     

Indeterminacy and cycles in two-sector discrete-time model

Summary. We consider a discrete-time two-sector Cobb-Douglas economy with positive sector specific external effects. We show that indeterminacy of steady states and cycles can easily arise with constant or decreasing social returns to scale, and very small market imperfections. This is in sharp contrast with most of the contributions in the literature in which increasing social returns are required to generate indeterminacy. Received: July 31, 2000; revised version: June 5, 2001     

Indeterminacy in a dynamic two-country model

The purpose of this paper is to show that indeterminacy can arise in a simple competitive two-country dynamic model of international trade, free of externalities, imperfect competition, and government intervention. This seemingly surprising result is based on an assumption that there is no international credit market. As will be shown later, the assumption implies that dynamic equilibrium paths of our two-country, therefore heterogeneous consumer, model are not generally Pareto-optimal.The paper is dedicated to Professor Mukul Majumdar on the occasion of his 60th birthday with great respect. We thank Takashi Kamihigashi, Tapan Mitra and Makoto Yano for their useful comments on the earlier version of this paper.