Financial Globalization and Animal Spirits

Using a multi-country general equilibrium model, we demonstrate that when agents face credit constraints in an international financial market, rational expectations, which are ex-post heterogeneous between countries, cause business fluctuations. If the international financial market becomes perfect, only a unique perfect foresight equilibrium is obtained, implying that no business fluctuations appear.Business fluctuations; Financial globalization; Sunspots; Heterogeneous agents; Rational expectations

Endogenous Growth and Fluctuations in an Overlapping Generations Economy with Credit Market Imperfections

We study the dynamic properties of growth rates in an overlapping generations economy with credit market imperfections. The analysis demonstrates that in early stages of financial development where credit constraints are severe, growth rates evolve monotonically. At the intermediate level of financial development, as the degree of credit market imperfections diminishes, growth rates exhibit endogenous fluctuations for some parameter values. However, as the financial sector matures, fluctuations disappear and the growth rates evolve once again monotonically.Credit market imperfections; Endogenous business fluctuations; Endogenous growth; Heterogeneous agents

Collateral Constraints and Legal Protection of Lenders: A Macroeconomic Perspective

We identify countries that establish collateral-based lending systems with a small-open-economy version of Nobuhiro Kiyotaki and John Moore’s (1997) model. We find that 47 countries in 1980s and 48 countries in 1990s out of 98 countries establish collateral-based lending systems. We also investigate the origin of collateral-based lending systems and find that if a country offers good legal protection for lenders, then a collateral-based lending system is more likely to be embedded in that country.Credit constraints; Collateral-based lending; Legal protection of lenders; Kiyotaki-Moore model

Corruption, Globalization, and Economic Growth: Theory and Evidence

We investigate, both theoretically and empirically, how the negative effects of government corruption on economic growth are magnified or reduced by capital account liberalization. Our model shows that highly corrupt countries impose higher tax rates than do less corrupt countries, thereby, magnifying the negative impacts of government corruption on economic growth in the highly corrupt countries and reducing the impacts in the less corrupt countries if capital account liberalization is enacted. Empirical evidence obtained from an analysis of the panel data collected from 111 countries supports our theoretical predictions. Our theoretical and empirical results contribute to the recent policy debates on the merits or demerits of capital account liberalization.Economic growth; Government Corruption; Capital account liberalization; Two-country model

Finance and Inequality: How Does Globalization Change Their Relationship?

This research demonstrates that international financial integration changes the way in which financial development affects inequality within a country. Specifically, both the cross-country analysis and the dynamic panel data analysis using data collected from more than 100 countries provide evidence indicating that if the financial market of a country is highly open to the world market, financial development widens inequality within that country, whereas if the financial market of a country is highly closed to the world market, financial development narrows inequality within that country. Our theoretical framework provides a possible explanation for our empirical findings.Financial integration; Inequality; Financial development; Credit constraints; Capital flows

Magnetohydrodynamic shocks in and above post-flare loops: two-dimensional simulation and a simplified model

Solar flares are an explosive phenomenon, where super-sonic flows and shocks are expected in and above the post-flare loops. To understand the dynamics of post-flare loops, a two-dimensional magnetohydrodynamic (2D MHD) simulation of a solar flare has been carried out. We found new shock structures in and above the post-flare loops, which were not resolved in the previous work by Yokoyama and Shibata 2001. To study the dynamics of flows along the reconnected magnetic field, kinematics and energetics of the plasma are investigated along selected field lines. It is found that shocks are crucial to determine the thermal and flow structures in the post-flare loops. On the basis of the 2D MHD simulation, we have developed a new post-flare loop model which we call the pseudo-2D MHD model. The model is based on the 1D MHD equations, where all the variables depend on one space dimension and all the three components of the magnetic and velocity fields are considered. Our pseudo-2D model includes many features of the multi-dimensional MHD processes related to magnetic reconnection (particularly MHD shocks), which the previous 1D hydrodynamic models are not able to include. We compare the shock formation and energetics of a specific field line in the 2D calculation with those in our pseudo-2D MHD model, and we found that they give similar results. This model will allow us to study the evolution of the post-flare loops in a wide parameter space without expensive computational cost and without neglecting important physics associated with magnetic reconnection.Comment: 51 pages, 22 figures. Accepted by Ap

"Tripolar Structure of the International Banking and Financial Markets-Transformation in the 1990s-" (in Japanese)

The purpose of this paper is to analyze the transformation of the international banking and financial markets in the 1990s. In the 1990s, while the international bank loans remained stagnant, the international securities market expanded. Four feature of the international banking market are following. (1) Loans to developing countries remained stagnant, while loans to developed countries. (2) The share of the Japanese banks in the external assets declined. (3) The share of the Japanese banks declined, while that of the German banks increased in the international banking assets. (4) The yen's share decreased, while the euro's share increased in the international banking assets. Four features of the international securities market are following. (1) The issue of international securities increased with the development of securitization. (2) The amount of raising money by the developing countries increased until the Asian Crisis. (3) The share of Japan in the international bonds and notes outstanding declined, while those of the USA and Germany increased. (4) The yen's share declined, while the dollar's share and the euro's share increased in the international bonds market.

Asset bubbles, economic growth, and a self-fulfilling financial crisis: a dynamic general equilibrium model of infinitely lived heterogeneous agents

We develop a dynamic general equilibrium growth model with infinitely lived heterogeneous agents to describe a self-fulfilling financial crisis accompanied by an asset bubble burst as a rational expectations equilibrium. Because of financial market imperfections, asset bubbles appear under mild parameter conditions even though we assume infinitely lived agents. Although these bubbles have both a crowd-in liquidity effect and a crowd-out effect on investment, the former effect always dominates the latter. Thus, a self-fulfilling financial crisis accompanied by an asset bubble burst results in an economic recession. This phenomenon is consistent with empirical observations on financial crises in the existing literature. In addition, we present an effective government policy to avoid self-fulfilling financial crises

Ca II K Spectral Study of an Emerging Flux Region using Domeless Solar Telescope in Hida Observatory

A cooperative observation with Hida observatory and Hinode satellite was performed on an emerging flux region. The successive Ca II K spectro-heliograms of the emerging flux region were taken by the Domeless Solar Telescope of Hida observatory. Hinode observed the emerging flux region with Ca II H and Fe I Stokes IQUV filtergrams. In this study, detailed dynamics and temporal evolution of the magnetic flux emergence was studied observationally. The event was first detected in the photospheric magnetic field signals. 3 minutes later, the horizontal expansion of the dark area was detected. And then, 7 minutes later than the horizontal expansion, the emerging loops were detected with the maximal rise speed of 2.1 km/s at chromospheric heights. The observed dynamics of emerging magnetic flux from the photosphere to the upper chromosphere is well consistent with the results of previous simulation works. The gradual rising phase of flux tubes with a weak magnetic strength was confirmed by our observation.Comment: 14 pages, 7 figure

Business Cycles and Financial Crises: A Model of Entrepreneurs and Financiers

A dynamic general equilibrium model with infinitely lived entrepreneurs and financiers is developed to investigate a possible mechanism that explains business cycles and a financial crisis. The highest growth rate is achievable only if financiers coexist with entrepreneurs, given a certain extent of financial market imperfections. However, if financiers coexist with entrepreneurs, the economy is highly likely to go into a financial crisis for some parameter values. These two-sided implications of the coexistence of entrepreneurs and financiers explain why both instability and high growth are frequently observed in modern economies