Ichiro Tokutsu

The cost of capital to corporations in Japan and the U.S.A

Abstract The average 1962–1984 cost of capital was probably lower in Japan than in the U.S.A., but this was not necessarily true of the marginal cost, and in any case the difference was not large enough to explain the higher rate of investment in Japan. The combined tax impact on the average cost of capital does not seem to have been markedly different in the two countries and even the direction of the effect on the marginal cost is not clear. The apparently lower average cost of capital in Japan reflected lower real interest rates and greater reliance on corporate debt.

Price-endogenized Input–Output Model: A General Equilibrium Analysis of the Production Sector of the Japanese Economy

This paper considers a generalization of the open Leontief model, by endogenizing the input coefficients on the basis of the neoclassical multi-sectoral produc-tion function. The adopted production function is of the two-level CES type, which is quite effective for avoiding the multi-collinearity problem. As a result, the estimates obtained are quite stable, satisfying the quasi-concavity conditions of the production function for all the sectors. Comparative statics based on the Jacobian of the excess supply function for each commodity market reveal that, owing to the factor substitution the effect of an increase in the final demand on the level of the production is significantly smaller than that which occurs in the open Leontief model with fixed input coefficients.

FINANCIAL DISTRESS AND INDUSTRY STRUCTURE: AN INTER-INDUSTRY APPROACH TO THE LOST DECADE IN JAPAN

This paper proposes a novel approach to investigating the propagation mechanism of balance sheet deterioration in financial institutions and firms, by extending the input–output analysis. First, we use a unique input–output table augmented by firm size dimension. Second, we link the input–output table with the balance sheet conditions of financial institutions and firms. Based on Japanese input–output tables, we find that the lending attitude of financial institutions affected firms’ input decision in the late 1990s and the early 2000s. Simulation exercises are conducted to evaluate the effects of changes in the lending attitude toward small firms as favorable as that toward large firms on sectoral allocations. We find that output was increased for small firms and reduced for large firms. The change in output was non-negligible, about 5.5% of the initial output of each sector. In particular, it exceeded 20% in textile, iron and steel and fabricated metal products.

Quadrilateral market dependence: Japan, USA, European Union, and Asian countries

Abstract The mutual dependence of the market economy in a multiple-industry, multiple-country system is empirically analyzed based on a price-endogenized input–output model. The model presented in this study is a pseudo-CGE model of the Keynesian type, which does allow for unemployment. The study deals with the short-run effect of the government policy of one country upon prices and outputs of all markets in all countries, along with the change of the macroeconomic conditions like GDP, employment and the trade balance. It is found that the Asian economic region plays a role as driving-force in promoting the world economic activity.

Public Debt, Economic Growth and the Real Interest Rate:A Panel VAR Approach to EU and OECD Countries

We investigate the causal relationship between the public debt to GDP ratio and economic growth for 31 EU and OECD countries from 1995 to 2013. A number of studies have tackled this problem, but very few make the transmission mechanism explicit in their analysis. We estimate a panel VAR model that incorporates the long-term real interest rate on government bonds as a vehicle to transmit shocks in both the public debt to GDP ratio and economic growth. We find no causal link from the public debt to GDP ratio to the GDP growth rate, irrespective of the levels of public debt. Rather, we find a causal relation from the GDP growth rate to the public debt to GDP ratio. In high-debt countries, the direct negative impact of economic growth on public debt is enhanced by a rise in the long-term real interest rate, which in turn decreases interest-sensitive demand and leads to a further increase in the public debt to GDP ratio.

The Impact of Tradeon Wages; What If Countries Are Not Small?

This paper explores the effect of trade on the relative wage of less-skilled labor through its effect on world prices, which are typically exogenously given under the small open economy assumption. Using the 1995 international input-output data for APEC member countries, we numerically simulate a general equilibrium model to study the effects of abolishing existing tariffs under the assumption that each member country is large enough to affect the prices of goods and services produced in the region. We find that the responsiveness of prices plays an important role in easing a possible adverse effect of trade on relative wages.