An Interest Rate Model with Upper and Lower Bounds

We propose a new interest rate dynamicsmodel where the interest rates fluctuate in a bounded region. The model ischaracterised by five parameters which are sufficiently flexible to reflect theprediction of the future interest rates distribution. The interest rate convergesin law to a Beta distribution and has transition probabilities which arerepresented by a series of Jacobi polynomials. We derive the moment evaluationformula of the interest rate. We also derive the arbitrage free pure discountbond price formula by a weighted series of Jacobi polynomials. Furthermore wegive simple lower and upper bounds for the arbitrage free discount bond pricewhich are tight for the narrow interest rates region case. Finally we show thatthe numerical evaluation procedure converges to the exact value in the limitand evaluate the accuracy of the approximation formulas for the discount bondprices.     

Anticipatory effects of voluntary export restraints: a study of home video cassette recorders market, 1978-86

This paper investigates the impact of voluntary export restraints (VERs) at the pre-implementation stage when exporters have a good prospect for the VERs. Distinctive features of the VCR market in 1978-86 provide a testable hypothesis to analyze the effect of the EC-Japan VERs, which were implemented in the fiscal years of 1983-85. The paper finds consistent evidence that the VERs affected firms’ pricing behavior in the U.S. market prior to the VER period, as a result of Japanese exporters’ anticipation of the VERs.     

Dynamic Free Trade Networks: Some Numerical Results

To help predict whether the proliferation of free trade agreements (FTAs) continues until global free trade is effectively attained, this paper investigates dynamic paths of FTAs, generated by numerical simulations of a model of an FTA network formation game with many countries. The characteristics of the final FTA network naturally depend on how the proposer of an FTA is chosen in each period. The paper finds that if the country that has the largest incentive to form an FTA is chosen as a proposer in each period, the network evolution always leads to a unique final FTA network, which may or may not be the complete network of FTAs. FTA networks often evolve to a partition of the world into a small number of groups of asymmetric size owing to the negative network externality caused by preference erosion.     

The government expenditure–economic growth relation in Japan: an analysis by using the ADL test for threshold cointegration

Based on annual data from Japan for the period 1960 to 2010, we investigate the government expenditure–economic growth relation in Japan by using the autoregressive distributed lag test for threshold cointegration developed by Li and Lee (2010). In particular, we evaluate the validity of Wagner’s view and the Keynesian view in the case of Japan. The empirical results presented herein indicate that of these two classical economics perspectives, only Wagner’s view holds for Japan. The findings also demonstrate that the adjustment process towards its long-run equilibrium is asymmetric.     

RENEWABLE RESOURCE AND CAPITAL ACCUMULATION UNDER UNCERTAINTY

An economy endowed with a renewable natural resource and physical capital is considered in order to examine the characteristics of possible transformation from natural to man-made capital, as a potential means of surviving over long periods of time if the natural resource may be depleted or fall short of certain sustainable levels. Natural resource together with physical capital is utilized to produce a commodity that is either to be sold in a market to earn sales revenue or invested to accumulate physical capital. The reserve size of resource and the production technology are both subject to uncertainties that are modeled by Wiener processes. The Wiener process is used to express the intrinsic nature of uncertainty for a long planning horizon such as on natural resources, in which distant futures are more difficult to foresee than the near future. It is shown that there exists a steady-state equilibrium in this economy under certainty and that, under some plausible conditions, the expected rate of change in resource harvest over time under uncertainty is less than the rate under certainty, while that of product sales is not affected by uncertainty.     

Evolution with Delay

This paper analyses evolutionary models with delays in players’ observations. I apply best response dynamics to symmetric 2 × 2 games, in particular the coordination game and the game with no symmetric pure strategy equilibrium. When the dynamics have no delay, their solutions converge to symmetric Nash equilibria monotonically. However when I introduce delays to the dynamics, although these dynamics represented by differential difference equations are seemingly simple, it shows that they have periodic solutions. JEL Classification Number: C79.     

WHO BENEFITS FROM CORRODING KEIRETSU?

Abstract. Observations on Japan's industrial distribution system reveal that many producers maintain both keiretsu and non‐keiretsu channels. An intriguing question then is: what economic rationale underlies such an ambivalent policy? This motivated us to present a model of an incomplete keiretsu system. We find that the collapse of a keiretsu is not necessarily a misfortune for the firms remaining therein: they can turn the situation to their advantage if a keiretsu collapses partially. We show why some firms leave their keiretsu while others remain with it, and determine who the winners are.     

On the de-facto convex structure of a least square problem for estimating the term structure of interest rates

We will show that the objective function of a constrained least square problem for estimating the term structure of the interest rates discussed in [4] is in fact convex in the feasible region defined by a set of linear constraints. This means that the algorithm developed in [4], which uses a linear or quadratic approximation to the objective function, generates a globally optimal solution of a constrained least square problem.     

A Two-country Comparison of Public Sector Performance Reporting: The Tortoise and Hare?

Recent Australian and Japanese second tier public sector performance measurement changes are compared and contrasted. The case analyses are presented within a theoretical structure derived from Hood's depiction of NPM which predicts an increased emphasis on explicit performance reporting. Significant differences and similarities are identified in terms of performance reporting effort and output; motivation for changed performance reporting; role of central agencies; and degree of resultant accountability discharge. NPM is a useful analytical framework and is enhanced by Luder's Contingency Model, epistemic community influence and governance. The explanatory factors identified reinforce views that NPM is a term best used solely in the context of the governmental traditions of each relevant public sector.