Endogenous Timing in Strategic Environmental Policymaking

In this paper, we endogenize the timing of policymaking in a simple two-country model of strategic environmental policy. We consider a timing game in which two policymakers non-cooperatively decide their preferred sequence of moves before setting emission tax rates. We show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages: When the damages are insignificant, the tax rates are strategic substitutes and the simultaneous-move policymaking emerges in equilibrium. In contrast, when the damages are significant, the tax rates are strategic complements and the sequential-move policymaking emerges. In addition, we extend the model by allowing for differences in the vulnerability to environmental damages between countries. When the differences are large, the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader. In the case where multiple equilibrium emerges, the risk dominant equilibrium is also that the less vulnerable country leads.Strategic environmental policy; Endogenous timing; Environmental tax; Duopoly

Empirical Analysis of Yield Determinants in Japan’s Municipal Bond Market: Does Credit Risk Premium Exist?

In this study, we examine the determinants of the yield spread between issuers in Japan’s municipal bond market using panel data and focus on identifying whether credit risk premium exists. The results of the panel data analysis reveal new evidence on the municipal bond market for FY 2002–2013. In the first half of the 2000s, the fundamental fiscal statistics, that is, the credit risk indicators, had no impact on the yield spreads, suggesting the absence of credit risk premium. Second, Yūbari city’s insolvency in 2006 led to a structural break and since then, investors have begun accounting for local governments’ outstanding debt. Third, when important financial events occur, other credit risk indicators also significantly impact the yield spread, suggesting that during such events, investors are more aware of credit risk presence. Finally, the findings of this study provide implications for, perhaps, financial institutions, market participants, regulators

Endogenous Timing in Strategic Environmental Policymaking

In this paper, we endogenize the timing of policymaking in a simple two-country model of strategic environmental policy. We consider a timing game in which two policymakers non-cooperatively decide their preferred sequence of moves before setting emission tax rates. We show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages: When the damages are insignificant, the tax rates are strategic substitutes and the simultaneous-move policymaking emerges in equilibrium. In contrast, when the damages are significant, the tax rates are strategic complements and the sequential-move policymaking emerges. In addition, we extend the model by allowing for differences in the vulnerability to environmental damages between countries. When the differences are large, the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader. In the case where multiple equilibrium emerges, the risk dominant equilibrium is also that the less vulnerable country leads

Yield Curve for Japanese Agency Bonds: From 2002 to the Present

In this study, we aim to estimate the daily par yield curve for Japanese agency bonds since 2002. The agency bond market is one of the most practically and academically disputatious areas in terms of whether public agencies as issuers are disciplined by the market. Given the drastic reformation of it public agencies in the 2000s, this topic holds far more importance in Japan than in other countries. To the best of our knowledge, this research is the first to make the par rate of Japanese agency bonds publicly available. Our estimation is based on the well-known parametric and spline methods, of which we found that the latter fits well, as in previous studies. Further, we have posted the estimation data on our website and will continue to update it regularly: http://www.mcnnns77.net

The Japan Municipal Bond Yield Curve: 2002 to the Present

The aim of this paper is to present the par yield curve for Japan’s Municipal Bonds, by examining daily data from 2002 to the present. Moreover, this paper contributes to current literature by making available for the first time additional long-run market data on Japan’s Municipal Bonds, and thereby enabling economists and practitioners to analyze the large municipal bond market of Japan in detail. We also investigate the fit of the well-known parametric and spline methods and are able to show that the spline method does, in fact, fit well as in previous studies. In keeping with our aim to make these data more widely available, we posted the data on the following website and expect to update this regularly: http://www.mcnnns77.net

REIT Equity Financing and Capital Investment in the Presence of the Central Bank Put

This is the first study to show that the Bank of Japan's (BOJ) unconventional monetary policy of purchasing shares of real estate investment trusts (REITs) affects the real economy through equity-financed investment. Specifically, the paper first shows that the BOJ purchases REIT shares after observing a significantly negative cumulative overnight-morning return. This put-option-like downside protection to the REIT market has a positive market-wide effect on intraday returns in proportion to each REIT's exposure to BOJ equity demand. The targeted REITs are more likely to issue equity and invest the raised capital in real assets, consistent with the BOJ's intention to stimulate corporate spending by lowering the cost of capital. However, this investment response is limited to the targeted REITs. Keywords: equity public offerings, large-scale asset purchases (LSAP), quantitative easing (QE), central banking, real estate investment trust, unconventional monetary policy JEL codes: E52, E58, R3

Empirical Analysis of Yield Determinants in Japan’s Municipal Bond Market: Does Credit Risk Premium Exist?

In this study, we examine the determinants of the yield spread between issuers in Japan’s municipal bond market using panel data and focus on identifying whether credit risk premium exists. The results of the panel data analysis reveal new evidence on the municipal bond market for FY 2002–2013. In the first half of the 2000s, the fundamental fiscal statistics, that is, the credit risk indicators, had no impact on the yield spreads, suggesting the absence of credit risk premium. Second, Yūbari city’s insolvency in 2006 led to a structural break and since then, investors have begun accounting for local governments’ outstanding debt. Third, when important financial events occur, other credit risk indicators also significantly impact the yield spread, suggesting that during such events, investors are more aware of credit risk presence. Finally, the findings of this study provide implications for, perhaps, financial institutions, market participants, regulators

Endogenous Timing in Strategic Environmental Policymaking

In this paper, we endogenize the timing of policymaking in a simple two-country model of strategic environmental policy. We consider a timing game in which two policymakers non-cooperatively decide their preferred sequence of moves before setting emission tax rates. We show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages: When the damages are insignificant, the tax rates are strategic substitutes and the simultaneous-move policymaking emerges in equilibrium. In contrast, when the damages are significant, the tax rates are strategic complements and the sequential-move policymaking emerges. In addition, we extend the model by allowing for differences in the vulnerability to environmental damages between countries. When the differences are large, the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader. In the case where multiple equilibrium emerges, the risk dominant equilibrium is also that the less vulnerable country leads

Yield Curve for Japanese Agency Bonds: From 2002 to the Present

In this study, we aim to estimate the daily par yield curve for Japanese agency bonds since 2002. The agency bond market is one of the most practically and academically disputatious areas in terms of whether public agencies as issuers are disciplined by the market. Given the drastic reformation of it public agencies in the 2000s, this topic holds far more importance in Japan than in other countries. To the best of our knowledge, this research is the first to make the par rate of Japanese agency bonds publicly available. Our estimation is based on the well-known parametric and spline methods, of which we found that the latter fits well, as in previous studies. Further, we have posted the estimation data on our website and will continue to update it regularly: http://www.mcnnns77.net