Every property is testable on a natural class of scale-free multigraphs

In this paper, we introduce a natural class of multigraphs called hierarchical-scale-free (HSF) multigraphs, and consider constant-time testability on the class. We show that a very wide subclass, specifically, that in which the power-law exponent is greater than two, of HSF is hyperfinite. Based on this result, an algorithm for a deterministic partitioning oracle can be constructed. We conclude by showing that every property is constant-time testable on the above subclass of HSF. This algorithm utilizes findings by Newman and Sohler of STOC'11. However, their algorithm is based on the bounded-degree model, while it is known that actual scale-free networks usually include hubs, which have a very large degree. HSF is based on scale-free properties and includes such hubs. This is the first universal result of constant-time testability on the general graph model, and it has the potential to be applicable on a very wide range of scale-free networks.Comment: 13 pages, one figure. Difference from ver. 1: Definitions of HSF and SF become more general. Typos were fixe

How to solve the cake-cutting problem in sublinear time

In this paper, we show algorithms for solving the cake-cutting problem in sublinear-time. More specifically, we preassign (simple) fair portions to o(n) players in o(n)-time, and minimize the damage to the rest of the players. All currently known algorithms require Omega(n)-time, even when assigning a portion to just one player, and it is nontrivial to revise these algorithms to run in $o(n)$-time since many of the remaining players, who have not been asked any queries, may not be satisfied with the remaining cake. To challenge this problem, we begin by providing a framework for solving the cake-cutting problem in sublinear-time. Generally speaking, solving a problem in sublinear-time requires the use of approximations. However, in our framework, we introduce the concept of "eps n-victims," which means that eps n players (victims) may not get fair portions, where 0< eps =< 1 is an arbitrary constant. In our framework, an algorithm consists of the following two parts: In the first (Preassigning) part, it distributes fair portions to r < n players in o(n)-time. In the second (Completion) part, it distributes fair portions to the remaining n-r players except for the eps n victims in poly}(n)-time. There are two variations on the r players in the first part. Specifically, whether they can or cannot be designated. We will then present algorithms in this framework. In particular, an O(r/eps)-time algorithm for r =< eps n/127 undesignated players with eps n-victims, and an O~(r^2/eps)-time algorithm for r =< eps e^{{sqrt{ln{n}}}/{7}} designated players and eps =< 1/e with eps n-victims are presented.Comment: 15 pages, no figur

How do the Asian Economies Compete with Japan in the US Market, China Exceptional? A Triangular Trade Approach

Political conflicts among trading partners have changed their forms with ever-increasing flows of foreign direct investment. A decrease in the exports of Japan might merely be a reflection of a global production shift by Japanese multinational corporations. We investigate the effect of Japanese trade on the exports of other countries to the United States in the 1990s. In our sample we include eight Asian countries besides the US and Japan. With the trade data disaggregated at the HS 4-digit level, we regress the exports of an Asian country to the US on the Japanese exports to the US and the third-country, and the Japanese FDI to a third-country in a panel data specification. Among eight countries investigated, we find the evidence that Chinese and Japanese exports are substitutes in the US market while the exports of China to the US are partly promoted by Japanese FDI to China. The estimation result confirms a view that China competes vigorously with Japan in the US market while Japanese multinationals are adjusting their production bases to China in a process of reforming a new global production network.China; Foreign Direct Investment; Japan; Trade; Triangular Trade Approach

East Asia and Global Imbalances: Saving, Investment, and Financial Development

We investigate the role of budget balances, financial development and openness, in the evolution of global imbalances. Financial development -- or the lack thereof -- has received considerable attention as a possible contributing factor to the development of persistent and expanding current account imbalances. Several observers have argued that the depth and sophistication of US capital markets have caused capital to flow from relatively underdeveloped East Asian financial markets. In this paper, we extend our previous work by examining the effect of different types and aspects of financial development. Our cross-country analysis, encompassing a sample of 19 industrialized countries and 70 developing countries for the period of 1986 through 2005, yields a number of new results. First, we confirm a role for budget balances in industrial countries when bond markets are incorporated. Second, empirically both credit to the private sector and stock market capitalization appear to be equally important determinants of current account behavior. Third, while increases in the size of financial markets induce a decline in the current account balance in industrial countries, the reverse is more often the case for developing countries, especially when other measures of financial development are included. However, because of nonlinearities incorporated into the specifications, this characterization is conditional upon other factors. Fourth, a greater degree of financial openness is typically associated with a smaller current account balance in developing countries.

Distance on FDI and Trade: The Roles of China and Mexico in the Pacific Basin

In this study, we investigate the dynamics of the trilateral trade relationship among the U.S., Japan and an emerging economy in the Pacific Basin. Our particular attention is paid to two emerging countries; China and Mexico. In what we call the “triangular trade approach,” we explore how Japanese trade with and foreign direct investment to an emerging economy affect its exports to the US market. We apply the trilateral trade approach to eight Southeast Asian countries, four American continent countries and four European countries. Our empirical results suggest that the exports of China and Mexico are directly competing with those of Japan in US markets while the exports of China and Mexico to the US also appears to be promoted partly by Japanese exports to these countries. However, after controlling for Japan’s FDI to these countries, the trade enhancing effect of Japanese exports disappears for China, leading us to conclude that Japanese exports to China are positively correlated with Chinese exports to the US through an increase in vertical trade between Japanese multinationals and their affiliates in China. Our results indicate important distinction about two distances: proximity to home country and proximity to market.China, Distance; Foreign Direct Investment; FTA; Japan; Trade; Mexico; Triangular Trade Approach

Trilemma Policy Convergence Patterns and Output Volatility

We examine the open macroeconomic policy choices of developing economies from the perspective of the economic “trilemma” hypothesis. We construct an index of divergence of the three trilemma policy choices, and evaluate its patterns in recent decades. We find that the three dimensions of the trilemma configurations are converging towards a “middle ground” among emerging market economies -- managed exchange rate flexibility underpinned by sizable holdings of international reserves, intermediate levels of monetary independence, and controlled financial integration. Emerging market economies with more converged policy choices tend to experience smaller output volatility in the last two decades. Emerging markets with relatively low international reserves/GDP could experience higher levels of output volatility when they choose a policy combination with a greater degree of policy divergence. Yet this heightened output volatility effect does not apply to economies with relatively high international reserves/GDP holding.

Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence

The empirical relationship between capital controls and the financial development of credit and equity markets is examined. We extend the literature on this subject along a number of dimensions. Specifically, we (1) investigate a substantially broader set of proxy measures of financial development; (2) create and utilize a new index based on the IMF measures of exchange restrictions that incorporates a measure of the intensity of capital controls; and (3) extend the previous literature by systematically examining the implications of institutional (legal) factors. The results suggest that the rate of financial development, as measured by private credit creation and stock market activity, is linked to the existence of capital controls. However, the strength of this relationship varies with the empirical measure used, and the level of development. These results also suggest that only in an environment characterized by a combination of a higher level of legal and institutional development will the link between financial openness and financial development be readily detectable. A disaggregated analysis indicates that in emerging markets the most important components of these legal factors are the levels of shareholder protection and of accounting standards.

What Matters for Financial Development? Capital Controls, Institutions, and Interactions

We extend our earlier work, focusing on the links between capital account liberalization, legal and institutional development, and financial development, especially that in equity markets. In a panel data analysis encompassing 108 countries and twenty years ranging from 1980 to 2000, we explore several dimensions of the financial sector. First, we test whether financial openness can lead to equity market development when we control for the level of legal and institutional development. Then, we examine whether the opening of the goods sector is a precondition for financial opening. Finally, we investigate whether a well-developed banking sector is a precondition for financial liberalization to lead to equity market development and also whether bank and equity market development complements or substitutes. Our empirical results suggest that a higher level of financial openness contributes to the development of equity markets only if a threshold level of general legal systems and institutions is attained, which is more prevalent among emerging market countries. Among emerging market countries, a higher level of bureaucratic quality and law and order, as well as the lower levels of corruption, increases the effect of financial opening in fostering the development of equity markets. We also find that the finance-related legal/institutional variables do not enhance the effect of capital account opening as strongly as the general legal/institutional variables. In examining the issue of the sequencing, we find that the liberalization in cross-border goods transactions is found to be a precondition for capital account liberalization. Our findings also indicate that the development in the banking sector is a precondition for equity market development, and that the developments in these two types of financial markets have synergistic effects.