Financial Development and Volatility of Growth Rates: New Evidence

This paper examines the effect of financial development on growth volatility with the dynamic panel data analysis. It demonstrates empirically that financial development has a hump-shaped effect on growth volatility. In early stages of financial development, growth rates are less volatile. As the financial sector develops, an economy is highly volatile. However, as the financial sector matures and the financial market approaches a perfect one, the economy becomes less volatile once again.Growth Volatility; Financial Development; Dynamic Panel Models

Finance and Growth Cycles

This research examines the effect of financial development on volatility in economic growth. It demonstrates theoretically that financial development has a hump-shaped effect on volatility in economic growth. In early stages of the development of a financial sector, growth rates evolve monotonically. At the intermediate level of financial development, as the degree of credit market imperfections diminishes and as asymmetric information between borrowers and lenders is less pronounced, an economy exhibits endogenous growth cycles. However, as the financial sector matures, the volatility in the growth process dissipates and the growth rates evolve once again monotonically.Endogenous Growth Cycles; Financial Deepening; Credit market imperfections; Heterogeneous agents

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

ASCA Observation of the Low-Luminosity Seyfert 1.5 Galaxy NGC 5033

We present the results of an ASCA observation of the low-luminosity Seyfert 1.5 galaxy NGC 5033. A point-like X-ray source with a luminosity of 2.3x10^{41} erg s^{-1} in the 2--10 keV band (at 18.7 Mpc; Tully 1988, AAA045.002.054) was detected at the nucleus. The X-ray light curve shows variability on a timescale of ~10^4 s with an amplitude of ~20%. The X-ray continuum is represented by a weakly absorbed (N_H~9x10^{20} {cm^{-2}) power-law with a photon index of 1.72+/-0.04, which is quite similar to Seyfert 1 galaxies with higher luminosities. A Fe Kalpha emission line is detected at 6.40^{+0.08}_{-0.06} keV (redshift corrected) and the equivalent width is 290+/-100 eV. The line width is unresolved. The narrower line width and larger equivalent width compared to Seyfert 1s imply that fluorescent Fe Kalpha emission from matter further out from the center than the accretion disk significantly contributes to the observed Fe Kalpha line. We suggest that fluorescent Fe Kalpha emission from the putative torus contributes to the observed Fe Kalpha line.Comment: 17 pages, To appear in PASJ, Vol. 51, No.

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

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

JAPANESE FIRMS’ DEBT POLICY AND TAX POLICY

Understanding the effects of marginal tax rate on debt policy is crucial not only for　considering various capital structure theories of firms but also for evaluating corporate tax reform proposals. In this empirical study, we have found a positive relation in most cases between the firm-specific marginal tax rates (simulated using the method of Shevlin (1990) and Graham (1996)) and the debt ratio increase of Japanese firms. This result shows that the marginal tax rates significantly affect the debt policies of Japanese firms. Corporate tax reform to produce equal treatment of equity and debt is desirable in Japan.debt, capital structure, marginal tax rate, corporate tax