Does a central clearing counterparty reduce liquidity needs?

This study investigates whether and how central clearing influences the overall liquidity needs in a network of financial obligations. Utilizing the approach of flow network theory, we show that the effect of adding a central clearing counterparty (CCP) is decomposed into two effects: central routing, and central netting effects. Each effect can produce different liquidity needs according to different liquidity scenarios. The analysis indicates that adding a CCP in times of financial distress successfully reduces the overall liquidity needs if and only if the netting efficiency of the CCP is sufficiently high. Furthermore, once the economy is no longer in financial distress, higher netting efficiency of the CCP could conversely increase the overall liquidity needs. The results have implications for the effectiveness of CCPs in mitigating systemic risk in times of financial distress, and their operating costs once the distress has passed.     

Localization and overseas R&D activity: the case of Taiwanese multinational enterprises in China

This study investigates the determinants of overseas research and development (R&D) and the influences of various aspects of localization on affiliates' R&D intensity. Using a dataset of Taiwanese multinational enterprises (MNEs) in China, the empirical estimations find that MNEs with a larger firm size, more R&D expenditure, and a higher outward foreign direct investments intensity tend to undertake R&D. Host regions' characteristics, particularly market size and R&D resources, do matter for attracting MNEs to conduct R&D locally. Crucially, affiliates' R&D intensity is related to the degree of localization. The degree of market localization and localization of the R&D network has a positive association with affiliates' R&D intensity. From the perspective of R&D policy, a country with healthy R&D infrastructures helps attract the establishment of R&D labs of MNEs.     

Measuring Barriers to International Division of Labor in East Asia*

International fragmentation has developed dramatically in East Asia since the 1990s. The purpose of the present paper is to measure border barriers in transactions of intermediate goods in East Asian countries. We find that the barriers in each country have steadily declined since 1985. The barriers in China and Taiwan have declined remarkably since the 1980s, whereas those in Indonesia experienced a slight increase in the 1980s. These results are qualitatively unchanged even if we control the effect of agglomeration on intra‐national inputs.     

Tariff scheme choice

Review of World Economics - This paper examines the determinants of the probability that an exporter chooses between a most-favored nation (MFN) scheme and multiple regional trade agreement (RTA)...     

Automobile risk perceptions and insurance-purchasing decisions in Japan and the United States

Cross-cultural differences of risk perceptions and insurance-purchasing decisions in Japan and the United States were examined by looking at one common risk, automobile accidents. In-depth interviews with 42 Japanese subjects were conducted in the city of Kasukabe, Japan, in June and July 1997. Their responses were compared with those of 74 US subjects from Western Pennsylvania (Austin, 1996). Systematic differences were observed in reasons given for having automobile insurance, judged probabilities of accidents, and judged probabilities of being at fault. These differences are examined in terms of cultural, driving, and market factors.     

How does import processing time impact export patterns?

We examine how import processing time, which is one of the major obstacles in international trade, affects export patterns at the establishment level. Investigating the effect of such time costs on export patterns reveals how smoothness or sluggishness in operations at one stage affects all stages in an international production network. We first discuss the effects of import processing time on exports, export shipment frequency and exports per shipment from a theoretical standpoint. We employ highly detailed customs data for Thailand from 2007 to 2011 to empirically investigate our theoretical predictions. Import processing time is measured using the difference between the dates on which import shipments arrive in ports and when they were released from the container yard. Results suggest that longer import processing times reduce total exports, particularly as a result of decreasing export frequency; this testifies to the importance of time costs in international trade. It is also revealed that negative effects of import processing time on exports per shipment appear in some specific instances, such as in the case of sea transportation. These results imply that the time spent in one stage has significant effects on both upstream and downstream stages in international production networks.     

Debt, Death and Taxes

Does the level of government debt affect living standards and if so, to what extent? We quantify the impact of the U.S. federal debt using an open economy overlapping generations model in which consumers have long but finite lifetimes. A demographic structure allows fiscal policy changes to have different effects on different agents, and reveals the linkages between public debt, output and international trade. We find that reducing the debt has relatively modest impacts on aggregates, while reducing government spending substantially raises U.S. incomes and welfare. Therefore, this paper contributes to the current debate regarding whether U.S. federal government budget surpluses should be used to retire government debt.     

Real purchasing power in the neoclassical monetary growth model

In the one sector neoclassical monetary growth model, the balanced growth path under perfect foresight is a saddle point. The paper demonstrates that this instability problem can be resolved by entering real purchasing power into the liquidity preference function as well as into the consumption function. This process allows an additional mechanism based on income effects in money demand by which a change in real balances can influence the growth path. Stability now depends critically on the size of such income effects given wealth effects from money demand. If stability is restored, the nature of the traditional non-neutrality of money must be qualified.