Interlinkage in the endogenous real business cycles of international economies

Summary This study investigates interlinkage among the business cycles of countries from the viewpoint of endogenous real business cycles. For this purpose, we build a simple perfect foresight equilibrium model with two countries and characterize the global dynamics of a free-trade equilibrium as well as that of each country's autarky equilibrium by means of the fundamental structure of an economy.We are greatful to Murray Kemp, Mukul Majumdar, Takashi Negishi, Marcus Noland, Ian Novos, Jose Scheinkman and an anonymous referee for useful conversations and suggestions.     

An extensive analysis on the Japanese markets via S. Taylor's model

Applying S. Taylor's approach (1986), we make an extensive analysis on the Japanese stock market, foreign exchange market and the Japanese Government Bond Futures market. The purpose of this paper is to empirically reveal the structure of the Japanese markets via Taylor's model rather than to propose a new model. For this reason, we include a variety of analyzed data particularly for the Japanese stock market and the foreign exchange market because the results can be used in a different manner. The paper consists of three parts. But each part can be read separately. Part 1: Overshooting hypothesis for Japanese stock prices Part 2: A trend movement in daily/weekly Yen-Dollar exchange rates Part 3: Price variations of Japanese Government Futures. In the first part, the stock prices are shown to over-respond to new information, which is different from the behaviors of stock prices in other markets. In Part 2, a trend movement is revealed in Yen-Dollar exchange rates. In Part 3, a strategy in the Japanese Government Bond futures markets is shown to perform better than a buy and hold strategy.     

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.     

Supply shocks and the interdependence of macroeconomic stability under flexible exchange rates

This paper analyzes the effects of a change in the monetary policy of a large economy on the macroeconomic stability of a small open economy with high dependence on imported intermediate goods. The analysis is carried out using the Taylor framework where the money supply rule is specified by the degree of monetary accommodation of price shocks. A supply shock to the large country is transmitted as both demand and supply shocks to the small country. A shift toward less monetary accommodation by the large country is shown to increase both price and output instability in the small country through the supply side linkage, while it may enhance price or output stability through the demand side linkage. Simulation results for Germany and Japan suggest that the supply side effect on price stability is important and that the effect on output stability depends crucially on the importance of trade in goods between the large country and the country in question.     

Ergodic chaos in optimal growth models with low discount rates

Summary We show that for every discount factor(0,1) one can find infinitely many strictly concave discrete-time optimal growth models in reduced form which have optimal policy functions exhibiting ergodic chaos. These reduced form models are interpreted in a two-sector optimal growth setting with utility functions depending on consumption as well as on capital.We thank Luigi Montrucchio for pointing out an error in a previous version of the paper.     

Japanese Companies in China: Problems of Human Resource Management

Much of China's recent economic growth has been driven by foreign funded enterprises (FFEs). They continue to invest heavily, making China the largest recipient of foreign direct investment (FDI) among all developing countries. Japanese firms have already shifted the focus of their FDI from the US to Asian countries, including China. However, there are many difficulties which Japanese companies have yet to over-come, especially in human resource management (HRM). Although FDI in China has become a significant phenomenon, it is still under-researched, and the role of Japanese firms and the transferability of Japanese-style management figure prominently amongst the relevant issues. Initial information allows us to make conclusions about which cultural, production, and product factors influence the importation of business systems.     

The trade credit channel revisited: evidence from micro data of Japanese small firms

It is suggested that trade credit can be a substitute for bank loans for small- and medium-sized enterprises (SMEs) that have little access to external funding sources. Using unique cross-sectional survey data of Japanese SMEs, we conduct a deep investigation into the substitutability between bank loans and trade credit. This survey contains rich information on the suppliers of trade credit to SMEs, thus enabling the examination of the channel through which credit is provided from suppliers to customers. We find that SMEs with little access to bank credit depend more on large suppliers for trade credit. We also find that when a purchase is made from a large supplier, more credit is indeed provided in the form of trade credit. Furthermore, this channel of credit from large suppliers to SMEs is only observed for solvent customers, not for insolvent customers. Our findings suggest that trade credit plays an important role for entrepreneurial firms over the financial growth cycle. For young and small firms with little access to bank loans trade credit is an important funding source.     

Multiple equilibria in two-sector monetary economies: An interplay between preferences and the timing for money

In this paper, we study the occurrence of local indeterminacy in two-sector monetary economies. We consider a general MIUF model with two alternative timings in monetary payments: the Cash-In-Advance timing, in which the cash available to buy goods is money in the consumers’ hands after they leave the bond market but before they enter the goods market, and the Cash-After-the-Market timing, in which agents hold money for transactions after leaving the goods market. We consider three standard specifications of preferences: the additively separable formulation, the Greenwood–Hercovitz–Huffman (GHH) (Greenwood et al., 1988) formulation and the King–Plosser–Rebelo (KPR) (King et al., 1988) formulation. First, we show that for all the three types of preferences, local indeterminacy occurs under the CIA timing with a low enough interest rate elasticity of money demand. Second, we show that with the CAM timing, although determinacy always holds under separable preferences, local indeterminacy can occur with GHH and KPR preferences. We thus prove that compared to aggregate models, two-sector models provide new rooms for local indeterminacy when non-separable standard preferences are considered.     

Can consumption habit spillovers be a source of equilibrium indeterminacy?

This paper investigates whether the external consumption habit can be a source of indeterminacy in a one-sector growth model when the labor supply is elastic. When there is a proper habit effect with a positive intertemporal elasticity of substitution, we find that the model exhibits indeterminacy if the coefficient of the habit formation is sufficiently large that allows for a substantial impact of current consumption on the habit. Indeterminacy arises even though the elasticity of the Frisch labor supply is positive and the elasticity of the labor demand in negative. In a calibrated version, we find that indeterminacy is empirically plausible when the habit effect is negative that features the “catching up with the Joneses” effect. Under given “catching up with the Joneses” effects, the external consumption habit can be a source of indeterminacy even if more than a half of the external consumption habit comes from past average consumption.