Quantum limit in continuous quantum measurement

An inequality about quantum noise is presented with the imprecise measurement theory, which is used to analyse the quantum limit in continuous quantum measurement. Different from the linear-response approach based on the quantum relation between noise and susceptibilities of the detector, we provide an explicit functional relation between quantum noise and reduction operator, and show a rigorous result: The minimum noise added by the detector in quantum measurement is precisely equal to the zero-point noise. This conclusion generalizes the standard Haus-Caves quantum limit for a linear amplifier. We also discuss the statistic characters of the back-action force in quantum measurement and show on how to reach the quantum limit.Comment: 18 page

Financial institutions and the wealth of nations: tales of development

Interactions between economic development and financial development are studied by looking at the roles of financial institutions in selecting R&D projects (including for both imitation and innovation). Financial development is regarded as the evolution of the financing regimes. The effectiveness of R&D selection mechanisms depends on the institutions and the development stages of an economy. At higher development stages a financing regime with ex post selection capacity is more effective for innovation. However, this regime requires more decentralized decision-making, which in turn depend on contract enforcement. A financing regime with more centralized decision-making is less affected by contract enforcement but has no ex post selection capacity. Depending on the legal institutions, economies in equilibrium choose regimes that lead to different steady-state development levels. The financing regime of an economy also affects development dynamics through a ‘convergence effect’ and a ‘growth inertia effect’. A backward economy with a financing regime with centralized decision-making may catch up rapidly when the convergence effect and the growth inertia effect are in the same direction. However, this regime leads to large development cycles at later development stages. Empirical implications are discussed

Financial Institutions, Contagious Risks, and Financial Crises

In this paper contagious risks and financial crises are endogenized through the interactions among corporations, banks, and the interbank market. We show that the lack of financial discipline in a single-bank-financing economy generates informational problems and thus the malfunction of the interbank market, which constitutes a mechanism of financial contagion and may lead to a financial crisis. In contrast, financial discipline in an economy with diversified financial institutions leads to timely information disclosure from firms to banks and improves the informational environment of the interbank market. With symmetric information in the interbank market, bank runs are contained to insolvent banks and financial crises are prevented. Our theory sheds light on the causes and timing of the East Asian crisis; it also has important policy implications for the lender of last resort and banking reform.http://deepblue.lib.umich.edu/bitstream/2027.42/39828/3/wp444.pd

LAW ENFORCEMENT UNDER INCOMPLETE LAW: Theory and Evidence from Financial Market Regulation

This paper studies the design of law-making and law enforcement institutions based on the premise that law is inherently incomplete. Under incomplete law, law enforcement by courts may suffer from deterrence failure, defined as the socialwelfare loss that results from the regime's inability to deter harmful actions. As a potential remedy a regulatory regime is introduced. The major functional difference between courts and regulators is that courts enforce law reactively, that is only once others have initiated law enforcement procedures, while regulators enforce law proactively, i.e. on their own initiative. Proactive law enforcement may be superior in preventing harm. However, it incurs high costs and may err in stopping potentially beneficial activities. We study optimal regime selection between a court and a regulatory regime and present evidence from the history of financial market regulationIncomplete law, law enforcement, financial market, regulation

Ownership and Managerial Competition: Employee, Customer, and Outside Ownership

This paper centers around the question of ownership of firms and managerial competition and how these affect managers and employees' incentives to invest in human capital. We argue that employees' incentives in human capital investment are affected by both ownership and competition since both ownership structure and competition provide bargaining chips to employees. Ownership provides protections which may improve or dull employees' incentives for human capital investment. When there is fierce market competition and no lock-in the allocation of ownership does not play a role (as one might expect), provided that human and physical assets are sufficiently complementary. If asset complementarity is low, ownership matters even in the absence of lock-in. In general, the most efficient ownership arrangement is that which maximizes managerial competition inside the firm.ownership structure, property rights theory, competition, managerial labor market, privatization

The Rise of China as an Economic Power

In the twenty years since the Cultural Revolution, China has maintained fast real growth. This occurred despite China having similar problems to other transitional economies, eg loss-making State Owned Enterprises (SOEs), eroding fiscal revenues and inflation, (Section 3). Although China initially adopted the Soviet central planning model, after the 1950s break Chinese planning changed towards a regionally-based system with local planning (Section 2). In contrast to the centrally-based, functionally-specialized (U form or unitary structure) Soviet model, the Chinese-economy is organized on a multi-layer-multi-regional (M form) basis. This encouraged development of small size township and village enterprises (TVEs), the main engine of Chinese growth. Power and control remained with the Party and the State, but was diffused much more widely, regionally and locally. This allowed initiatives at lower (political) levels to establish institutions, both in agriculture (the 'household responsibility system') and industry (TVEs), without state protection. Even among regionally controlled SOEs, 'tournament rivalry' between regions, etc, and between SOEs and TVEs provided competition.

Financial Sector Returns and Creditor Moral Hazard: Evidence from Indonesia, Korea, and Thailand

This paper introduces a framework of investor behavior in which investors form their expectations regarding the credibility of a prospective IMF program in reforming the financial sector characterized by domestic implicit guarantees. We examine the changes in financial sector returns in response to IMF-related news such as announcements of program negotiations and approval to infer investor perception regarding the Fund support associated with the program. We test the implications of our framework based on the East Asian crisis of the late 1990s. Using daily financial sector returns from Indonesia, Korea, and Thailand, we find that news of program negotiations and approval increases financial sector returns in Indonesia and Korea. The findings are consistent with investor perception that negotiated IMF programs are non-credible due to expected continuation of domestic implicit guarantees during the future FundMoral Hazard, the IMF, Asian crisis, Financial markets