Akihisa Shibata

Keeping One Step Ahead of the Joneses: Status, the Distribution of Wealth, and Long Run Growth

Assuming that the utility of each agent depends on its relative wealth position in the society, this chapter constructs an endogenous growth model. It is shown that even if the subjective discount rates differ across agents, there exists a unique balanced growth equilibrium in which each agent owns a positive share of the world wealth. It is also shown that if the agents are identical then an increase in savings incentives always raises the long run growth rate but if they are heterogeneous then an increase in savings incentives may lower the long run growth rate.

Capital mobility in the world economy: an alternative test

Abstract This paper proposes a new measure and test of international capital mobility. In order to investigate capital flows, we utilize a small open economy version of Campbell and Mankiws [NBER Macroeconomic Annual (1989) 185–216] permanent income model. Our capital mobility measure focuses on the correlation between the countrys consumption and net output instead of the correlation between domestic saving and domestic investment proposed by Feldstein and Horioka [Economic Journal 90 (1980) 314–329]. The model is estimated for 11 OECD countries. The results suggest that the null hypothesis of perfect capital mobility cannot be rejected for more than a half of these countries. On the other hand, some kind of capital mobility constraints are detected for several countries including the United States and Japan.

Monetary Policy, Overlapping Generations, and Patterns of Growth

This paper investigates the role of monetary policy in economic growth. Using an infinitely lived overlapping-generations model with a simple convex technology that can yield endogenous growth, the authors show that money supply behavior of the government may have significant effects on the long-run economic growth. In addition to the effect on the long-term growth rate of the economy, the policy may determine whether the economy stays in the exogenous growth process restricted by the growth rate of labor supply or realizes the endogenous growth that sustains continuous growth of per capita income and consumption. Copyright 1995 by The London School of Economics and Political Science.

Fundamentals-dependent bubbles in stock prices

Abstract In a continuous-time model of stock prices with dividends growing stochastically we examine bubbles which depend on market fundamentals. The fundamentals dependency stabilizes bubble dynamics. They can be stochastically stable, saddlepoint-stable, or unstable. Stock prices with these bubbles can be less volatile than fundamental prices. These bubbles exhibit various transition patterns, such as nonmonotonic movements and monotonic shrinkage in magnitude and volatility. The sign of their correlation with market fundamentals is time-varying. We introduce crash risks, permitting bubbles to crash partially and display various stochastic process switching. Crash risks affect the stochastic stability of bubbles.

Spill-over effects of supply-side changes in a two-country economy with capital accumulation

Abstract Using a two-country dynamic optimization model with capital accumulation, we explore the effect of such supply-side changes as a rise in productivity and a reduction in the corporate tax rate on the equilibrium path and the welfare of two countries. The welfare effect consists of a tax distortion term and a wealth term. Those supply-side changes in the creditor country increase its welfare but unambiguously decrease the debtor countrys welfare, as capital moves from the debtor country to the creditor country.

FINANCE AND INEQUALITY: HOW DOES GLOBALIZATION CHANGE THEIR RELATIONSHIP?

This research demonstrates that international financial integration changes the way in which financial development affects inequality within a country. Specifically, both the cross-country analysis and the dynamic panel data analysis using data collected from more than 100 countries provide evidence indicating that if the financial market of a country is highly open to the world market, financial development widens inequality within that country, whereas if the financial market of a country is highly closed to the world market, financial development narrows inequality within that country. Our theoretical framework provides a possible explanation for our empirical findings.

Fundamentals uncertainty, bubbles, and exchange rate dynamics

Abstract Using a monetary model of exchange rate determination, we study exchange rate dynamics with bubbles which depend on stochastic market fundamentals. These dynamics can be either stochastically stable or unstable; and either monotonic or non-monotonic (including cyclic). In an extreme case, they converge with probability one and exhibit cyclic movements. Implications for the analysis of time-dependent regime shifts are also explored. Exchange rates with bubbles are likely to appear less volatile than the fundamentals in finite samples. Both the variance bounds and cointegration tests might thus be ineffective in testing the absence of bubbles under fundamentals uncertainty.

Growth Effects of Bubbles in an Endogenous Growth Model

This paper examines the possibility of the existence of bubbles and their effects on the growth rate by using an endogenous growth model. A necessary and sufficient condition for the existence of steady-state equilibrium with bubbles is provided. If non-zero rates of the useless asset supply are allowed, a steady-state equilibrium with bubbles exists even if the growth rate of the bubbleless equilibrium is lower than the market interest rate. The growth rate in the steady state with bubbles depends positively on the supply rate of the useless asset. Dynamic properties of bubbles are also analysed.

Long-Run Specialization

Constructing a dynamic Heckscher-Ohlin model, we examine long-run specialization patterns in the presence of international technological differences. Even a slight difference in technology causes at least one country to specialize. Either the case of perfect specialization in both countries or the case of perfect specialization in one country and imperfect specialization in the other occurs, depending on the subjective discount rate, relative preference for two commodities, labor endowments, and technological conditions. A necessary and sufficient condition for each case to hold is provided. Structural differences between the Ricardian model and ours are also emphasized. Copyright

Growth and Welfare Effects of Monetary Expansion in an Overlapping‐generations Economy

This paper studies the relation between money supply and the long-run economic growth in the context of an endogenous growth model with overlapping generations. We present detailed analyses of growth and welfare effects of monetary expansion under alternative money supply rules. It is shown that, although monetary expansion has a growth-enhancing effect in the long run, in general it is not a Pareto-improving policy. We also pay much attention to the presence of multiple equilbria in endogenous money supply regimes.