Stability of stochastic optimal growth models: a new approach

The paper proposes an Euler equation technique for analyzing the stability of differentiable stochastic programs. The main innovation is to use marginal reward directly as a Foster-Lyapunov function. This allows us to extend known stability results for stochastic optimal growth models, both weakening hypotheses and strengthening conclusions.     

Trade and Indeterminacy in a Dynamic General Equilibrium Model

This paper introduces sector-specific externalities in the Heckscher-Ohlin two-country dynamic general equilibrium model to show that indeterminacy of the equilibrium path in the world market can occur. Under certain conditions in terms of factor intensities, there are multiple equilibrium paths from the same initial distribution of capital in the world market, and the distribution of capital in the limit differs among equilibrium paths. One equilibrium path converges to a long-run equilibrium in which the international ranking of factor endowment ratios differs from the initial ranking; another equilibrium path maintains the initial ranking and converges to another long-run equilibrium. Since the path realized is indeterminate, so is the long-run trade pattern. Therefore, the Long-Run Heckscher-Ohlin prediction is vulnerable to the introduction of externality. Journal of Economic Literature Classification Numbers: E13, E32, F11, F43.     

Long-Run Effects of Monetary Expansion in a Two-Sector Model of Endogenous Growth

This paper explores the long-run effects of monetary expansion by introducing a cash-in-advance constraint into one of the basic models of endogenous growth. In our model, the real side of the economy consists of two production sectors, one of which produces a final good that can be used either for consumption or for investment and the other produces new human capital. Both sectors use physical and human capital under constant returns to scale technologies. We first characterize the balanced-growth equilibrium and then examine how a rise in money growth affects the relevant variables, such as the long-term growth rate and the relative prices.     

Price distortion induced by a flawed stock market index

Despite the introduction of sophisticated stock market indices, investors often trade portfolios of the flawed indices to change their exposure to the market. In this study, we show that these transactions cause significant mispricing in individual stocks, especially during periods of significant market movement. As an influential, albeit flawed, stock index, we focus on the Nikkei 225. We find index constituents that are excessively weighted on the index, experience buying (selling) pressure when the stock market surges (falls), and experience price corrections after such periods of change. In contrast, non-constituent stocks do not experience such trading pressure.     

Structural Decomposition Analysis of Japan’s Energy Transitions and Related CO2 Emissions in 2005–2015 Using a Hybrid Input-Output Table

Environmental and Resource Economics - This study investigates Japan’s energy transitions in 2005–2015, which involved massive economic disruptions due to the 2011 Great East Japan...     

A dynamic two country Heckscher–Ohlin model with non-homothetic preferences

We examine the properties of a two-country dynamic Heckscher–Ohlin model that allows for preferences to be non-homothetic. We show that the model has a continuum of steady state equilibria under free trade, with the initial conditions determining which equilibrium will be attained. We establish conditions under which a static Heckscher–Ohlin theorem will hold in the steady state, and also conditions for a dynamic Heckscher–Ohlin theorem to hold. If both goods are normal, each country will have a unique autarkic steady state, and all steady state equilibria are saddle points. We also consider the case in which one good is inferior, and show that this can lead to multiple autarkic steady states, violations of the static Heckscher–Ohlin theorem in the steady state. Furthermore, there may exist steady state equilibria that Pareto dominate other steady states. These steady states will be unstable if discount factors are the same in each country, although they may exhibit dynamic indeterminacy if discount factors differ.     

The influence of indoor air on personal exposure to volatile organic compounds and its risk estimation

This paper summarizes the results of personal exposure monitoring and estimates the risk from exposure to 18 volatile organic compounds compared with health criteria set by the US Environmental Protection Agency. In study 1, personal exposure levels and outdoor air concentrations were compared, and in study 2, personal exposure levels and the corresponding indoor air concentrations were compared. From these studies, it was concluded that personal exposure to volatile organic compounds depended markedly on indoor air quality and that handling of compounds increased personal exposure markedly. Risk estimations indicated that chloroform in tap water, benzene from cigarette smoke and p -dichlorobenzene from household insecticide needed caution.     

Expectation-driven fluctuations and welfare loss under free trade in two-country models

This paper investigates the interlinkage in the business cycles based on expectation-driven fluctuations of large-country economies in a free-trade equilibrium. We consider a two-country, two-good, two-factor general equilibrium model with sector-specific externalities. We show that some country's expectation-driven fluctuations can spread throughout the world once trade opens even if the other country has determinacy under autarky. We thus prove that under free trade, globalization and market integration can have destabilizing effects on a country's competitive equilibrium. Finally, we characterize a configuration in which opening to international trade improves the stationary welfare at the world level but deteriorates the stationary welfare of the country that imports investment goods and exports consumption goods. We conclude that in opposition to the standard belief, international trade might not be beneficial to all trading partners in the long run.     

On the shape of the single-country and world commodity-substitution and factor-substitution surfaces under conditions of joint production

In recent years trade theorists have completed the task of specifying necessary and sufficient conditions for the single-country and world transformation surfaces to be locally of any assigned degree of flatness. However those conditions are relevant only if the technology is of the no-joint-products type. In the present note we derive necessary and sufficient conditions for the single-country and world transformation surfaces to be of any assigned degree of flatness under conditions of joint production; and we also obtain, as a by-product, necessary and sufficient conditions for the single-country and world equal-product surfaces to be of any assigned degree of flatness.