ZERO NOMINAL INTEREST RATES,UNEMPLOYMENT, EXCESS RESERVES AND DEFLATION IN A LIQUIDITY TRAP

We present a dynamic monetary model that consistently explains various phenomena such as unemployment, deflation, zero nominal interest rates and excess reserves held by commercial banks. These phenomena were observed during the Great Depression in the USA, the recent long‐run stagnation in Japan and the recent depression triggered by the subprime loan problem in the USA. We show that an excessive liquidity preference leads to a liquidity trap and thereby generates the phenomena.     

Fiscal rules in a monetary economy: Implications for growth and welfare

This study considers two fiscal rules, a debt rule that controls the debt‐to‐gross domestic product (GDP) ratio, and an expenditure rule that controls the expenditure‐to‐GDP ratio, in a monetary growth model with financial intermediation. Tightening of fiscal rules promotes economic growth and thus, benefits future generations. However, there could be two equilibria of the nominal interest rates, and the welfare effects of the rules on the current generation are different between the two equilibria. In particular, the effects of a decreased debt‐to‐GDP ratio depend on its initial ratio; a high (low)‐ratio country has no incentive (an incentive) to reduce the ratio further from the viewpoint of the current generation's welfare. This result provides an explanation for difficulties with fiscal reform in countries with already high debt‐to‐GDP ratios.     

A search model of two-sided matching under nontransferable utility

In a decentralized marriage market there are different types of men and women. Agents sequentially search for mating partners and meet bilaterally in a random fashion. Upon meeting, the paired agents complete mating if both agree, and separate and continue searching otherwise. The polarization of interests between men and women appears as in Gale-Shapley marriage problems; as agents of one sex become more selective about their mates, agents of the other sex lose. As search costs disappear, the set of equilibrium outcomes in a search model reduces to the set of stable matchings in a corresponding Gale-Shapley marriage problem.     

Land-Tax, Transfer and Growth in an Endogenously Growing Economy with Overlapping Generations

In this paper we investigate the effect of a tax on land rent on the growth rate of capital in a growing economy with overlapping generations. A tax on land rent has a potential to increase the growth rate of capital. If the model is extended to allow the tax revenue to be refunded to individuals, a tax on land rent may deter growth to the extent that the tax revenue is transferred to the older generation.
JEL Classification numbers: H31, O41.     

The effects of foreign exchange and monetary policies in Russia

This paper examines the effects of Russian foreign exchange and monetary policies under conditions of abundant natural resources during the period 1999–2011 using structural VAR models. The results suggest that monetary policy shocks, which are identified as money supply disturbances, have a persistent effect on real output, and more than half of the volatility in real output can be explained by changes in the money supply. Furthermore, the analysis reveals that stock prices are a more significant transmission channel of monetary policy than bank loans.     

The effects of collateral on firm performance

This paper examines how collateral and personal guarantees affect firms’ ex-post performance employing a propensity score matching estimation approach. Based on a unique firm-level panel data set of more than 500 small-and-medium-sized borrower firms in Japan, we find that borrowers with high observed riskiness are more likely to pledge collateral. In addition, we find that borrowers that provide collateral to lenders experience larger increases in profitability and reductions in riskiness than borrowers that do not. The main channel through which the borrower enhances its profitability is cost-cutting restructuring. These findings are consistent with the hypothesis that collateral reduces moral hazard by providing borrowers with an incentive to enhance their creditworthiness.     

Retirement and social security: the roles of self-fulfilling expectations and educational investments

Countries with higher implicit taxes on continued work are associated with lower labor force participation rates of the elderly. This paper constructs a politico-economic model that accounts for this feature based on multiple, self-fulfilling expectations of agents. In this model, agents are identical at birth and can become skilled (or remain unskilled) through educational investment. When agents hold expectations of larger social security benefits, it provides a disincentive to engage in educational investment, thereby resulting in an unskilled majority. In turn, this unskilled majority supports larger social security benefits, which induces the retirement of the elderly and thus results in a lower labor force participation rate. The opposite applies when agents have expectations of smaller social security benefits in their old age.     

Monetary autonomy in emerging market economies: The role of foreign reserves

This paper examines trends in monetary autonomy and their interactions with financial integration, currency regimes and foreign reserves for recent decades in emerging Asian and Latin American economies. Our main findings are the following: First, most emerging Asian economies have increased monetary autonomy mainly due to changes in currency regimes toward floating regimes, while emerging Latin American economies have shown mixed results on monetary autonomy. Second, in all sample economies, the accumulation of foreign reserves has contributed to retaining monetary autonomy, probably implying the role of foreign reserves as an anchor for monetary autonomy in emerging market economies.     

Assessing the performance of inflation targeting in East Asian economies

This paper examines the implementation and performance of inflation targeting (IT) in four East Asian emerging market economies: Indonesia, Korea, the Philippines, and Thailand. It also examines monetary policy in Malaysia, a country that has not adopted IT. The study estimates policy reaction functions to test the links between the adoption of IT and use of a monetary policy rule. The impulse responses of prices to a monetary policy shock are also estimated to identify monetary policy impacts on prices. The findings on the monetary policies of the five economies can be summarised as follows. Korea has taken an inflation‐responsive and forward‐looking policy stance under inflation targeting, which has had an effect on the stability of prices. Indonesia and Thailand have conducted inflation‐responsive but backward‐looking policy stances, which have had no impact in terms of price stabilisation. The Philippines (which adopted IT but under a pegged exchange rate regime) and Malaysia have neither followed inflation‐responsive rules nor had policy impacts in terms of controlling inflation.     

Population and Urbanization Trends in Post-war Japan

This paper analyses the population change and urbanization process in post-war Japan. We trace the process of population concentration into urban areas, in parallel with economic development after the war. The concentration of population into urban areas can be characterized by three major metropolitan regions: Tokyo, Keihanshin (Kyoto-Osaka-Kobe) and Nagoya. We also show that the urbanization process of Japan in the period from 1965 to 1985 can be characterized by two spatial phenomena; firstly, the suburbanization of the existing metropolitan areas and, secondly, the spatial dispersal of urbanized areas.