Hiroshi Gunji

Convergence across Indian states: A re-evaluation *

In this paper, we examine the growth convergence hypothesis within a developing country. Across Indian states, income dispersion has widened in recent years. Some new methods that are used by many researchers for studies across countries or across U.S. regions are applied, and we find that almost all income sequences in the Indian states have unit roots. This result implies that, although India achieved relatively high growth in the 1990s, per capita income across states tended to diverge, and that income dynamics within a developing country may differ from those within a developed country.

Optimal Monetary Policy in an Estimated Local Currency Pricing Model

We analyze fluctuations in inflation and the nominal exchange rate under optimal monetary policy with local currency pricing by developing two-country DSGE local currency pricing and producer currency pricing models. We estimate our models using Bayesian techniques with Japanese and US data, and calculate impulse response functions. Our estimation results show that local currency pricing is strongly supported against producer currency pricing. From the estimated parameters, we show that completely stabilizing consumer price index inflation is optimal from the viewpoint of minimizing welfare costs and that completely stabilizing consumer price index inflation is consistent with completely stabilizing the nominal exchange rate.

Bank diversification and monetary policy

ABSTRACT Using bank-level data in Asia, we examine the relationship between the effectiveness of monetary policy and the business diversification of banks. We find that bank diversification enhances the effect of monetary policy.

Did Monetary Policy Matter in Prewar Japan

In this paper, we investigate whether monetary policy in prewar Japan was effective. Notwithstanding disagreements on whether it was effective, previous works have not suffciently studied the effects. So we evaluate them using three types of methods. First, we use the Granger causality tests and impulse response functions. Second, we use monthly data, which have not been used before. Third, the narrative approach proposed by Romer and Romer (1989, NBER Macroeconomics Annual) is adopted. These results suggest that monetary policy in prewar Japan had little effect on output.