Sources of Productivity Growth Dynamics: Is Japan Suffering From Baumol's Growth Disease?

This study examines the sources of labor productivity growth dynamics in Japan (1970–2010) and investigates the extent to which Japanese economic performance has been affected by Baumol's growth disease (BGD). We find that BGD silently undermines Japanese economic growth. However, the magnitude is miniscule, and consequently the aggregate labor productivity growth rate has not been decreasing monotonically. We also explore how BGD is arising and why it is small in the Japanese economy. BGD is weak because (1) the positive Baumol growth effect is also working in certain services sectors and (2) BGD is not a durable phenomenon: even if a sector begins to suffer from BGD, it is likely to recover quickly.     

On the test of the correction mechanism for mis-pricing between assets using a statistical yield spread model

This paper investigates the existence of a correction mechanism for mis-pricing between Japanese stock and bond. By this correction mechanism we mean that when deviations occur from the equilibrium levels of the expected return differentials between stock and bond — the risk premium differentials, the market will tend to correct the mis-pricing and bring the expected return differentials back to the equilibrium levels. We assume that the yield spread between the predicted earnings price ratio of stock and the yield to maturity of bond reflects the risk premium between stock and bond, and estimate the equilibrium risk premium differentials and mis-prices between stock and bond by modelling their behaviors with a statistical yield spread model (SYS). Empirical results strongly indicate the existence of the mis-pricing correction mechanism, suggesting the inefficiency of securities markets.     

Exchange Rate Pass‐through and Currency Invoicing: Implications for Monetary Integration in East Asia

Exporter's price‐setting behaviour and currency invoicing play a key role in the literature on the new open‐economy macroeconomics. This paper estimates exchange rate pass‐through coefficients for the exports of four ASEAN countries: Indonesia, Malaysia, the Philippines and Thailand. In addition, previous estimates of pass‐through as well as invoicing behaviour in East Asia are discussed in the context of regional integration. The new pass‐through coefficients are estimated under two alternate specifications for up to 34 goods for each of the four ASEAN countries destined for up to 13 major markets. The results suggest: (a) little pass‐through is occurring in Southeast Asia and (b) this lack of pass‐through is more likely attributable to the fact that they are small countries in a relatively integrated market, rather than evidence of pricing to market. The implications for regional monetary integration of this apparently low degree of pass‐through are detailed.     

Multilateral Comparison of Cost Structures in the Input–Output Tables of Japan,the US and West Germany

This paper presents a multilateral comparison of relative levels and structures of costs of production in Japan, the US and West Germany. The analysis is carried out by using harmonized input–output tables, which are converted at US prices by using adjusted sectoral purchasing power parities. A new accounting methodology is derived from recent developments of index number theory, whereas the chosen multilateral comparison procedure gives results that are invariant with respect to the order of the pairs of countries examined.     

Portfolio Optimization under Lower Partial Risk Measures

Portfolio management using lower partial risk (downside risk) measures is attracting more attention of practitioners in recent years. The purpose of this paper is to review important characteristics of these riskmeasures and conduct simulation using four alternative measures, lower semi-variance, lower semi-absolute deviation, first order below targetrisk and conditional value-at-risk.We will show that these risk measures are useful to control downside risk whenthe distribution of assets is non-symmetric. Further, we will propose a computational scheme to resolve the difficultyassociated with solving a large dense linear programming problems resulting from these models. We will demonstrate that this method can in fact solve problems consisting of10⁴ assets and 10⁵ scenarios within a practical amount of CPU time.