High‐Frequency Contagion of Currency Crises in Asia*

Using daily data from the Asian currency crisis, the present paper examines high‐frequency contagion effects among six Asian countries. The ‘origin’ (of exchange rate depreciation, or decline in stock prices) and the ‘affected’ (currencies, or stock prices) in the daily spillover relationship were defined and identified. Indonesia is found to be the main origin country, affecting exchange rates of other countries. Contrary to conventional wisdom, evidence of high‐frequency crisis spillover from the Thai exchange rate to other currencies was weak at best. There exists a high‐frequency contagion in stock markets among East Asian countries. Contagion coefficients are positively correlated with trade indices, indicating that investors lower their financial assessment of a country that has trade linkage to a crisis origin country within days, if not hours, of a shock.     

Firm age and the evolution of borrowing costs: Evidence from Japanese small firms

This paper investigates how firms’ borrowing costs evolve as they age. Using a new panel data set of about 100,000 bank-dependent small firms for 1997–2002 and focusing on the channel of “adaptation” (i.e., surviving firms’ borrowing costs decline as they age) and that of “selection” (i.e., total borrowing costs decline as defaulting firms exit), we find that the reputation hypothesis suggested by Diamond (1989) provides a more plausible explanation of the downward sloping age profile of borrowing costs than the firm dynamics (Cooley and Quadrini, 2001) or the relationship banking (Boot and Thakor, 1994) hypothesis. In addition, we examine whether the firm selection process in Japan has been natural or unnatural. Our findings suggest that it has been natural in that firms with lower quality are separated, face higher borrowing costs, and are eventually forced to exit, which contrasts with the results of previous studies on credit allocations in Japan, including Peek and Rosengren (2005). Further, we find that the evolution of borrowing costs is partially due to selection but is mainly attributable to adaptation.     

DOES TECHNOLOGICAL PROGRESS MAGNIFY REGIONAL DISPARITIES?

We study how technological progress in manufacturing and migration costs interact to shape the space economy. Rising labor productivity in the manufacturing sector fosters the agglomeration of activities, whereas falling transport costs associated with technological and organizational innovations foster their dispersion. Since these two forces have been at work for a long time, the final outcome must depend on how drops in the costs of producing and trading goods interact with the various costs borne by migrants. Various extensions show the robustness of these conclusions.     

Inside the learning dynamism inducing the resonance between innovation and high-demand consumption: A case of Japan's high-functional mobile phones

Confronting the simultaneous global economic stagnation that has resulted in diminishing consumption, a new driver which can instill in customers an exciting story with their own initiative and thrills them with gratification of consumption is essential. Japan's mobile phone driven innovation may provide a constructive suggestion to this requirement.On the basis of an empirical analysis focusing on the learning dynamism for innovative products in Japan's digital industry, this paper demonstrates the foregoing hypothetical anticipation. Based on measurement of dynamic learning coefficients for seven leading innovative products centered on mobile phones, the Granger causal test, Chow forecast test and wavelet analysis were conducted, and the significant role of mobile phones in leveraging broad dissemination, learning and absorption of core technologies essential to the advancement of digital industry was identified. Furthermore, significant role of demanding customers in inducing resonance between mobile phones learning and that of innovative products was demonstrated.     

A new economic geography model of central places

One of the most striking feature of the space-economy is that cities form a hierarchical system exhibiting some regularity in terms of their size and the array of goods they supply. In order to show how such a hierarchical system may emerge, we consider a model with monopolistically competitive markets for the industrial sectors. As transport costs steadily decrease from large values, the urban system formed by several small cities entails structural changes in that some cities expand at the expense of the others by attracting a growing number of industries. Beyond some threshold, some cities disappear from the space-economy. Such an evolution of the urban system describes fairly well what has been observed in various historical periods that have experienced major changes in transportation technologies and/or political unification.