Using Nonnormal Distributions to Analyze the Relationship Between Stock Returns in Japan and the US

The Pearson distribution system is researched and applied to financial engineering (Nagahara, Financ Eng Jpn Mark 2(2):139–154 in 1995, Financ Eng Jpn Mark 3(2):121–149 in 1996, Stat Prob Lett 43:251–264 in 1999, J Time Ser Anal 24(6):721–738 in 2003, A method of fitting multivariate nonnormal distributions to financial data. Discussion paper of Institute of Social Sciences, F-2006-2, Meiji University in 2006, Asia Pac Financial Markets 15(3–4):175–184 in 2008a). And a method of fitting multivariate nonnormal distributions by using random numbers from the Pearson distribution system was developed (Nagahara, Comput Stat Data Anal 47(1):1–29 in 2004). This method uses the grid search of the parameters for the maximum likelihood. In this paper, we adopt Grid-Computing and its middleware for the parameter sweep in order to reduce the computational time and the workload of this method. In the area of the financial risk management, it is very important to analyze the relationship between stock returns in Japan and the US. We analyze the data based on the same date and the following date because Japanese stock market opens before the US stock market opens in a day. We compare these returns by means of the multivariate nonnormal distributions by using this method. And we test the international transmission of stock markets movement. Furthermore, we obtain the optimal job schedule for our computer system using the middleware in order to reduce the computational time.     

Jane Jacobs on Henry George: Progress or Poverty?

Henry George and Jane Jacobs each have devoted followers today who remain mainly outside the intellectual mainstream, both are iconic American intellectuals largely sympathetic to and quite knowledgeable about how markets work, and they each challenged the prevailing economic orthodoxies of their day. Much has been written, pro and con, on George's single tax and on Jacobs's battles with urban planners, and while I don't directly address either here, what I say does have implications for those controversies. In particular, I show how and why their views on the nature of economic progress, and of cities in that progress, fundamentally differ. I trace the difference to George's essentially classical approach to economics in contrast to Jacobs's subjectivist approach, which more radically transcends the economics of her time.     

Weakly non-separable preferences and the Harberger-Laursen-Metzler effect

We examine the current account effect of a terms-of-trade deterioration for a small country model, incorporating weakly non-separable preferences à la Shi (1994) under endogenous time preference. This enables us to emphasize a welfare change as an important determinant of the current account. Even with increasing marginal impatience, the Harberger-Laursen-Metzler effect occurs if consumers' preference toward imports is sufficiently wealth enhanced: in that case a terms-of-trade deterioration must reduce steady-state welfare to shift preference away from imports to exports. Several empirical implications are also derived. JEL Classification: F41; F32
Préférences faiblement nonséparables et l'effet de Harberger-Laursen-Metzler. L'auteur examine l'effet sur le compte courant d'une détérioration des termes d'échange dans un modèle d'un petit pays, quand les préférences sont faiblement nonséparables à la Shi (1994) et que la préférence temporelle est endogène. Cela permet de souligner qu'un changement dans le niveau de bien-être est un déterminant important du compte courant. Contrairement à ce qu'on trouve dans la littérature spécialisée, même quand on postule une impatience marginale croissante, l'effet Harberger-Laursen-Metzler se produit si la préférence des consommateurs pour les importations est suffisamment dépendante du niveau de richesse: dans ce cas-là, une détérioration des termes d'échange doit réduire le niveau de bien-être en régime permanent de manière à déplacer les préférences des importations vers les exportations. On déduit certaines implications empiriques de ces résultats.     

Habit Formation And The Transfer Paradox

Using a two-country model with habit-forming consumers, we show that the transfer paradox can occur in a free-trade, dynamically stable economy. When the debtor is more in the habit of consuming than the creditor, an income transfer from the creditor to the debtor raises the interest rate in transition through changes in time preference. With sufficiently low elasticities of intertemporal substitution and/or sufficiently large stocks of the creditor's assets, the intertemporal terms-of-trade effect immiserizes the recipient and enriches the donor. This possibility cannot be excluded by the correspondence principle ( à la Burmeister and Long) as the dynamics are saddlepoint-stable.     

The nature and limits of Gary Becker’s theory of racial discrimination

To what extent does Gary Becker’s model of discrimination capture “the essence of prejudice and discrimination”? After providing a general outline of Becker’s original model and summarizing some subsequent developments, this paper takes a critical perspective on the model to suggest that the absence of imperfect information in his approach unhelpfully limits its explanatory power. Instead, an approach that allows for the possibility of genuine error and draws on Adam Smith’s analysis of the impact of markets on one’s moral sense offers a deeper, more realistic understanding of what it means for people to express their prejudice (or not) through their choices.     

The folk theorem for irreducible stochastic games with imperfect public monitoring

This paper introduces stochastic games with imperfect public signals. It provides a sufficient condition for the folk theorem when the game is irreducible, thus generalizing the results of Dutta (1995) [5] and Fudenberg, Levine, and Maskin (1994) [9]. To do this, the paper extends the concept of self-generation (Abreu, Pearce, and Stacchetti, 1990 [1]) to “return generation,” which explicitly tracks actions and incentives until the next time the state returns to its current value, and asks that players not wish to deviate given the way their continuation payoffs from the time of this return depend on the public signals that have been observed.     

Decreasing Marginal Impatience and Capital Accumulation in a Two‐Country World Economy

This research is the first to examine dynamic general equilibrium in a growing two‐country economy under decreasing marginal impatience (DMI). The stability condition is shown to be more restrictive than in the case of an endowment economy and/or under increasing marginal impatience (IMI). By analyzing global‐economy adjustment to time preference shocks, international transfers and productivity shocks, equilibrium dynamics in the presence of DMI differ drastically from what is obtained when the standard IMI model is used. For example, in a country characterized by DMI, a positive productivity shock improves the country's welfare level and lowers its steady‐state time preference and, hence, the steady‐state interest rate. This leads to an increase in the neighbouring country's capital stock.     

On the optimal mix of patent instruments

A special characteristic of the patent system is that it features multiple patent-policy levers that can be employed by policymakers. In this note, we develop an R&D-based growth model to analyze the optimal mix of patent instruments by considering patent breadth and the division of profit in research joint ventures. Our results are as follows. First, we analytically derive the optimal mix of patent breadth and the profit-division rule. Then, we calibrate the model to quantitatively evaluate the welfare gain from optimizing both patent instruments versus optimizing only patent breadth. We find that the welfare gain can be quantitatively significant.     

Correlated performance of firms in a transaction network

The correlation of firms’ performance on a transaction network is studied by analyzing financial and transaction data. Statistically significant correlation coefficients are obtained as evidence for the firm interactions. The firm interactions are taken into account in the basic equation of firm activity. Forty percent of residuals are explained by considering the firm interactions. The overall structure of the transaction network, i.e., the connectivity of industry sectors, is analyzed.     

Tariffs, Time Preference, and the Current Account under Weakly Nonseparable Preferences

Incorporating weakly nonseparable preferences into the familiar time–preference model, the author emphasizes a role of steady–state welfare changes in determining the effect of permanent tariffs on the current account. The effect consists of a welfare effect, due to steady–state welfare changes, which is negative (positive) when preferences toward imports are more (less) wealth–enhanced than toward exports; and a substitution effect, which occurs only with initial distortion. Even without initial distortion, a marginal tariff has a first–order welfare effect on the current account. Its sign does not depend on whether impatience is increasing or decreasing in wealth.