Tomoo Kikuchi

International asset market, nonconvergence, and endogenous fluctuations

We develop an overlapping generations model with re-tradeable paper assets and capital accumulation to analyze the interaction between the real economy and an international asset market. The world consists of two homogeneous countries, which differ only in their initial levels of capital. Consumers who live for two periods transfer wealth over time and across countries by holding international mutual funds which pay stochastic dividends. The optimal portfolio decisions of consumers do not necessarily induce convergence of incomes between the two countries. Moreover, interaction through the asset market induces endogenous fluctuation of capital flows between the rich and the poor country.

Endogenous inequality and fluctuations in a two-country model

We study a two-country version of Matsuyamas [K. Matsuyama, Financial market globalization, symmetry-breaking, and endogenous inequality of nations, Econometrica 72 (2004) 853-884] world economy model. As in Matsuyamas model, symmetry-breaking can be observed, and symmetry-breaking generates endogenously determined levels of inequality. In addition, we show that when the countries differ in population size, their interaction through credit markets may lead to persistent endogenous fluctuations.

Bubbles and Crowding-in of Capital via a Savings Glut ∗

This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed by a binding credit constraint, injecting a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional investors who expand investment at the extensive margin. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path after bubbles are injected.

Span of control, transaction costs, and the structure of production chains: Production chains

This paper builds coordination costs, transaction costs and other aspects of the theory of the firm into a production chain model with an infinite number of ex ante identical producers. The equilibrium determines prices, allocations of productive tasks across firms, firm sizes, and the number of active firms. These prices and allocations match several stylized facts on firm boundaries, vertical integration, and division of the value chain.

East Asia’s Growing Global Influence and Challenges in Finance and Trade

The conference series on “Evolving Finance, Trade and Investment in Asia” launched by the Centre on Asia and Globalisation in 2015 started with the aim to contribute to strengthening research capac...

Introduction: Evolving Finance, Trade and Investment in Asia

The year 2015 witnessed significant events in the area of finance, trade and investment, which brought Asia to the centre of the world stage. The Trans-Pacific Partnership (TPP) reached its basic agreement among the 12member countries in October; China’s Yuan was included into the Special Drawing Rights basket of currencies at the International Monetary Fund (IMF) in November; the ASEAN Economic Community (AEC) came into force on 31 December; and the Asian Infrastructure Investment Bank (AIIB) was established with the Article of Agreement signed by the 57 founding members in December. There is an urgent need within and outside the region to understand the underlying economic structures that brought about these events, which have global implications. The Centre on Asia and Globalisation has launched a series of conferences on ‘Evolving Finance, Trade and Investment inAsia’ with the aimof strengthening research capacity inAsia to influence regional policymaking. Looking forward, the conference will provide an annual platform for scholars to discuss the latest findings and to disseminate them to business leaders and policymakers. This special issue of the International Economic Journal includes a selection of papers that were presented at the inaugural international conference, which took place at Lee Kuan Yew School of Public Policy, National University of Singapore on 16–17 September 2015. The conference brought together prominent economists who are experts in the fields of finance, trade and investment in Asia. Fukunari Kimura (Keio University and Economic Research Institute for ASEAN and East Asia) and Ayako Obashi (University of Wisconsin and Keio University) confirm that China had become increasingly influential on the international stage through establishing a dominant position in production networks. By employing a new method of analysing finely disaggregated international trade data between 2007 and 2013, Kimura and Obashi find that China became the number one player inmachinery production networks not only in trade values but also in the diversity and density of the export production pairs. While China’s machinery export growth was mostly attributed to the intensive margin, China also built more trade relationships of existing products with new destination countries. Meanwhile, South Korea extended its production networks by transforming the product and destination composition in the exports of machinery final production, in line with China’s expansion. Japan lost its relative importance in the regional aswell as global context. Kimura and Obashi warn that the recent slowdown of the Chinese economy may affect