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Search Results: 1 - 10 of 1268 matches for " Masayuki Otaki "
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A Pure Theory of Aggregate Price Determination  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2011, DOI: 10.4236/tel.2011.13026
Abstract: This article considers aggregate price determination related to the neutrality of money. When the true cost of living can be defined as a function of prices in an overlapping generations (OLG) model, the marginal cost of a firm depends solely on the current and future prices. Thus, the sequence of equilibrium price becomes independent of the quantity of money. Hence, money becomes non-neutral. However, when people hold the extraneous belief that prices increases proportionately with money, this belief becomes self-fulfilling as long as the increment of money and true cost of living are low enough to guarantee full employment.
The Role of Money: Credible Asset or Numeraire?  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.22031
Abstract: It is well known that money is neutral if 1) people hold the extraneous belief that it is an only numeraire and does not possess intrinstic value, and 2) new money is injected into an economy as its own interest in the OLG model under perfect information (Lucas [1] Theorem (2)). We find that whenever 1) is not satisfied and money is rationally held to have substance value, money becomes non-neutral even if we use the same model as Lucas [1].
A Keynesian Model of a Small Open Economy under a Flexible Exchange Rate  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.23051
Abstract: This article considers the international diffusion of business cycles on the basis of a rigorous dynamic microeconomic foundation. The seminal work of Laursen and Metzler [1] suggests that the employment-isolation effect under the flexible exchange rate system is imperfect even if international capital mobility is completely prohibited. Assuming a small country model rather than the two-country model of Laursen and Metzler [1], we obtain the following results. (i) The business fluctuation of the world economy diffuses to the small country through a change in the inflation rate caused by the change in the real exchange rate. In this sense, the employment isolation is imperfect. (ii) Domestic monetary expansion has only an effect weaker than that of Mundell [2]-Fleming [3]. This is because a monetary expansion, which always accompanies a fiscal expansion, raises the current domestic price and lowers the inflation rate as long as the purchasing power of money (the inverse of future price) is kept intact. Such disinflation reduces the consumption demand in addition reducing the expansionary multiplier effect.
A Macroeconomic Consequence of Foreign Direct Investment: The Welfare Economics of Industrial Hollowing  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.24076
Abstract: This article considers macro and welfare economic implications concerning foreign direct investment under a flexible exchange rate system. There are serious conflicts between foreign-invested firms and their home country as a whole. Although lower wages incentivize firms to obtain foreign direct investment, such a movement harms the welfare of the home-country’s economy in the following ways. First, an increase in unemployment in the home country worsens the economy’s welfare as proved by Otaki [1]. Second, an appreciation in the real exchange rate, which is induced by the transfer of earned profits in foreign countries to the home country, reduces the value of profits in terms of domestic goods. We prove that such an appreciation entirely cancels the benefit from the cost reduction that originates from the foreign direct investment in lower-wage countries. In the end, only the downturn in employment circumstance remains. In this sense, the glut of foreign direct investment is harmful and, some coordination is required between firms and the government of the home country.
A Microeconomic Foundation for Optimum Currency Areas: The Case for Perfect Capital Mobility and Immobile Labor Forces  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.24073
Abstract: This article provides a microeconomic foundation for Mundell’s optimum currency area theory. We consider twin countries where labor forces are fixed to each country although the real capital moves internationally. When the central bank in each country behaves non-cooperatively, it will raise the domestic interest rate to attract more real capital and increase the rent of her residences. However, the fierce competition between the central banks ultimately exacerbates the disparity in income distribution. Moreover, when the real capital or the financial intermediary as its agent does not have a nationality, the worsened income distribution also results in the inefficient resource allocation. Thus, such twin countries should unify their central banks and coordinate their monetary and interest policies. In other words, these countries constitute an optimum currency area.
A Keynesian Endogenous Growth Theory with a Rigorous Microeconomic Foundation  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.24067
Abstract: Extending the effective demand theory developed by Otaki [1,2], we construct a demand-driven endogenous growth theory with a rigorous microeconomic foundation. An accelerator-principle investment function is derived by the intertemporal maximization behavior of monopolistic competitive employers. Under this investment function, an economy endogenously begins to expand even if the stability condition for goods markets is satisfied. Three factors determine the equilibrium growth rate: the degree of monopoly (the inverse of the price elasticity of each good) η﹣1, the marginal propensity to saving s, and the Mashallian k that can be manipulated by the government and is denoted by κ. The higher values of η﹣1 and s, and the lower value of κ , the more rapidly the economy expands.
How a Key Currency Functions as an International Liquidity Provision and Insurance System  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2013, DOI: 10.4236/tel.2013.31007
Abstract:

Although some previous studies assert that the selection of a key currency is a kind of hysteresis dominated by contingencies, historical evidence suggests that this selection depends on the following two plausible and inevitable economic factors that this study examines: overwhelming industrial power and the possession of huge amounts of foreign assets and gold. Based on the fulfillment of these economic factors, the key-currency country receives rents in return for bearing the sovereign risk and supplying sufficient liquidity to the countries within its network that accept its currency. Thus, the key-currency system can be regarded as an international liquidity provision and insurance system that relies on the economic power of the key-currency country.

A Study on Lucas’ “Expectations and the Neutrality of Money’’  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.25081
Abstract: This short article shows that the functional equation on the equilibrium price function is more complicated than that considered by Lucas [1], and that modification is required to complete the proof. Furthermore, we shall provide a sufficient condition that guarantees the uniqueness of the equilibrium price function.
The Aggregation Problem in the Employment Theory: The Representative Individual Model or Individual Employees Model?  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2012, DOI: 10.4236/tel.2012.25098
Abstract:

Employment theory does lacks a consensus concerning whether employment variation should be expressed as a change in the hours worked as a representative individual or as a change in the population of employed individuals. By appling the OLG model developed by Lucas [1] and Otaki ([2-4]), the present article describes a serious theoretical conesquence of distinction. The crucial factor that different employment theories are the intertemporal substitution effect and the indivisibility of labor force. Monetary expansion increases the rate of return for money if it is credible in the sense of Otaki [5]. This enhances the hours worked in the representative individual model, and thus, aggregate supply causes demand. Conversely, in the indivisible employees model, such an intertemporal substitution effect does not exist. The monetary expansion directly improves the purchasing power of money and thereby increases the aggregate demand for goods by the older generation. Thus, demand derives supply.

Inseparability of Transaction Medium and Store of Value in the Role of Money  [PDF]
Masayuki Otaki
Theoretical Economics Letters (TEL) , 2013, DOI: 10.4236/tel.2013.34038
Abstract:

We analyze whether or not money can be circulated as a purely transaction medium in the search theory. We obtain the following result: unless the role of a store of value added to the function of money, money does not circulate and the economy degenerates into a barter economy.

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