The Zero Lower Bound and Parameter Bias in an Estimated DSGE Model

This paper examines how and to what extent parameter estimates can be biased in a dynamic stochastic general equilibrium (DSGE) model that omits the zero lower bound (ZLB) constraint on the nominal interest rate. Our Monte Carlo experiments using a standard sticky‐price DSGE model show that no significant bias is detected in parameter estimates and that the estimated impulse response functions are quite similar to the true ones. However, as the frequency of being at the ZLB or the duration of ZLB spells increases, the parameter bias becomes larger and therefore leads to substantial differences between the estimated and true impulse responses. It is also demonstrated that the model missing the ZLB causes biased estimates of structural shocks even with the virtually unbiased parameters. Copyright © 2015 John Wiley & Sons, Ltd.     

Decentralization and economic growth revisited: an empirical note

Although it is theoretically expected that decentralization leads to efficient provision of local public services and stimulates economic development, there is a mixed picture of the decentralization effect on economic growth across earlier empirical studies. Using the instrument variables (IV) technique with the latest cross-country data for the period from 1997 to 2001, this paper found that fiscal decentralization has a significant positive impact on per capita GDP growth. Therefore, when the focus is placed on the latest information on the economic situation in the latter 1990s, decentralization, particularly on the fiscal expenditure side, is instrumental in economic growth.     

Sharing health risk and income risk within households: evidence from Japanese data

The question of which household members should consume medical services, and in what quantities, is examined by using Japanese household-level data. Two key concepts are employed, health risk and income risk, and whether family heads or dependants bear these risks investigated. Health risk is the risk that a household member falls ill, while income risk is the risk that future household income decreases. It is found that both heads and dependants make fewer visits to doctors as household size increases. It is also found that only dependants visited doctors less frequently following the reform of the public health insurance system, which raised the co-payment rate of family heads from 10% to 20%. These findings imply that heads and dependants share health risk but dependants bear income risk.     

An Emergency Evacuation Planning Model Using the Universally Quickest Flow

In recent years, catastrophic disasters by massive earthquakes have been increasing in the world, and disaster management is required more than ever. In the case of disasters such as tsunamis, a slight delay in evacuation may deprive evacuees of life. In this article, we formalize the emergency evacuation planning model for evacuation from tsunamis and other disasters based on the idea of the universally quickest flow. We show that there does not always exist a universally quickest flow when the capacity constraint of refuges is taken into account. Therefore, we propose an alternative criterion that approximates a universally quickest flow, and presents an algorithm for finding an optimal flow for this criterion. Numerical experiments are carried out for the evacuation of a local city in Japan where tsunami damages are assumed to occur when a large earthquake occurs in the ocean nearby.     

Correction to: Pointwise agglomeration in continuous racetrack model

Portuguese Economic Journal - Using analytical methods they devised, the authors intend to study economic aspects of the racetrack economy described as a continuous-space version of the new...     

A general theorem on tariff harmonization

This paper proves a general theorem on welfare improving tariff changes that a tariff harmonization towards any arbitrary common target tariff rates among member countries can improve potential world welfare as long as international lump-sum transfers are available.     

Local Sunspot Equilibria Reconsidered

We generalize the usual notion of local sunspot equilibria. We say such equilibria exist around a steady state of an OLG economy whenever stationary sunspot equilibria of arbitrarily close economies exist within any neighborhood of the steady state. Unlike the usual notion, this generalization allows to address the following identification problem: Can an analyst distinguish empirically small fluctuations due to small shocks to the fundamentals from pure expectations-driven fluctuations? We study conditions under which these generalized local sunspot equilibria exist in OLG economies, and show that they may exist around not only indeterminate but also determinate steady states.     

The Yonmenkaigi System Method: An Implementation-Oriented Group Decision Support Approach

The Yonmenkaigi System Method (YSM) is presented as a participatory method to support group decision making. It is composed of four main steps: conducting a SWOT analysis, completing the Yonmenkaigi chart, debating, and presenting the group’s action plan. The YSM is an implementation and collaboration-oriented approach that incorporates the synergistic process of mutual learning, decision making and capacity building. It fosters small and modest breakthrough and/or innovative strategy development. The YSM addresses the issues of resource management and mobilization as well as effective involvement and commitment by participants and provides a strategic communication platform for participants. A case study for developing a disaster reduction action plan, carried out with a local community organization in the City of Kyoto, Japan, is used to demonstrate the characteristics of the YSM.     

Tests of cointegrating rank with a trend-break

The conventional testing procedure may mislead one into accepting the null of no cointegration or the null of a cointegrating rank smaller than the true rank when there is a trend-break under the alternative hypothesis. This paper proposes tests for cointegrating rank that have power against the trend-break alternative. The proposed tests are applied to the US money demand function. The results support the Campbell–Perron conjecture: money, income and interest rates are cointegrated around a broken trend.     

Shadow-Pricing Interpretation of the Pigovian Rule for the Optimal Provision of Public Goods: A Note

The Pigovian rule for the optimal public goods provision with distortionary taxation is given a new interpretation. It relates the Pigovian rule to project evaluation rules in terms of shadow prices. Our formula for the Pigovian rule is compared with that given by existing literature for cases in which commodity taxes are set optimally to articulate the implications of their results. This approach also renders a clear insight on the nature of resource allocation and income redistribution effect involved in the public goods provision in a heterogeneous-consumers economy.