aspects of labor market adjustments in japan this article discusses some aspects of labor market adjustments in japan that may be relevant to the low unemployment rate there japanese statistics treat kyugyosha persons not at work as being employed but some of these workers would be counted as unemployed in the united states the kyugyosha group appears to increase in size during downturns and decreases during upturns suggesting that temporarily laid off persons are an important part of this group japanese employers evidently rely less on employment adjustments and more on adjustments in hours of work and inventory while employers in the united states rely more on employment adjustments to deal with cyclical changes in product demand japanese manufacturing employment became less sensitive and hours of work more sensitive to demand shocks after the introduction of the employment insurance law in 1975

beyond taxation discourse around energy policy in japan energy policy literature tends to emphasise the impact of taxation on energy preference however the present case concerning extremely low acceptance of diesel cars in japan could not be explained by taxation as a possible factor the paper sheds light upon discourse around the energy policy the policy aimed to characterise diesel technology as emitting particulate matter and nitrogen oxide nox the paper contributes to extending the existing understanding of the role of public policy by embracing the linguistic interactions complemented by visualisation

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

the taxation of diesel cars in belgium revisited this paper compares the current taxation of diesel and gasoline cars in belgium with the guidelines for optimal taxation we find that diesel cars are still taxed much less than gasoline cars resulting in a dominant market share for diesel cars in the car stock if the fuel tax is the main instrument to control for externalities and generate revenues the diesel excise should be much higher than the excise on gasoline for two reasons diesel is more polluting than gasoline and more importantly through the better fuel efficiency diesel cars contribute less fiscal revenues per mile

external debt capital flight and political risk abstract this paper explains the simultaneous occurence of large external debts private capital outflows and low domestic capital formation we consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment and induces the government to overaccumulate external debt the model also predicts that left wing governments are more inclined to restrict capital outflows than right wing governments finally we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change

do momentum based strategies still work in foreign currency markets this paper examines the performance of momentum trading strategies in foreign exchange markets we find the well documented profitability of momentum strategies during the 1970s and the 1980s has continued throughout the 1990s our approach and findings are insensitive to the specification of the trading rule and the base currency for analysis finally we show that the performance is not due to a time varying risk premium but rather depends on the underlying autocorrelation structure of the currency returns in sum the results lend further support to prior momentum studies on equities the profitability to momentum based strategies holds for currencies as well

covered interest arbitrage and market turbulence the covered interest parity theorem states that the covered interest differential between two similar assets denominated in different currencies should be zero this paper utilizes high quality data recorded by the dealers at the bank of england to test covered interest parity during certain historical periods in which there is known to have been turbulence as well as during a relatively calm control period the data is high frequency and allowance is made for the bid offer spread brokerage costs and other considerations the results have three main implications firstly profitable arbitrage opportunities do occasionally occur and sometimes persist during turbulent periods secondly the degree of efficiency of the relevant markets appears to have increased over time thirdly there appears to be a maturity effect whereby the existence and size of profitable arbitrage opportunities appear to be positive functions of the length of maturity a rationalization of this phenomenon is offered in terms of the existence of credit limits copyright 1989 by royal economic society

a note on the geometry of shanken s csr t2 test for mean variance efficiency abstract shanken 1985 derives a test for the zero beta capital asset pricing model capm which as he points out is equivalent to a test of the mean variance efficiency of the market portfolio this note illustrates the geometry of shanken s test in the mean variance space

optimal taxation of car ownership car use and public transport insights derived from a discrete choice numerical optimization model in this paper we study the taxation of car ownership car use and public transport in the presence of externalities within the framework of a discrete continuous choice model we first derive optimal taxes in a simplified setting emphasizing the specific role of fixed car ownership taxes and the relevance of public transport demand by non car owners for the optimal tax structure a numerical optimisation model is then constructed to study welfareoptimal public transport fares and two part tariffs on ownership and use of gasoline and diesel cars in belgium results are as follows first we find that the current differences in tax treatment between diesel and gasoline car ownership and use cannot be justified on the basis of external cost and budgetary considerations efficient pricing requires substantial increases in the relative user tax on diesel cars as compared to gasoline cars optimal fixed taxes are substantially below current levels and only marginally differ between car fuel types second if for political or technical reasons variable car taxes cannot be optimally adjusted large differences in fixed car taxes do result the same holds if the government uses kilometre taxes as the main variable tax instrument third the results of a series of marginal tax reform exercises suggest that a shift form gasoline towards diesel taxation is welfare improving both for fixed and variable taxes somewhat surprisingly a shift from fixed towards variable taxes is not necessarily welfare improving it is for diesel but not for gasoline cars

lessons from the evolution of foreign exchange trading strategies abstract the adaptive markets hypothesis posits that trading strategies evolve as traders adapt their behavior to changing circumstances this paper studies the evolution of trading strategies for a hypothetical trader who chooses portfolios from foreign exchange forex technical rules in major and emerging markets the carry trade and us equities the results show that a backtesting procedure to choose optimal portfolios improves upon the performance of nonadaptive rules we also find that forex trading alone dramatically outperforms the s p 500 with much larger sharpe ratios over the whole sample but there is little gain to coordinating forex and equity strategies which explains why practitioners consider these tools separately forex trading returns dip significantly in the 1990s but recover by the end of the decade and have been markedly superior to an equity position since 1998 overall trading rule returns still exist in forex markets with substantial stability in the types of rules though they have migrated to emerging markets to a considerable degree

will a radical transport pricing reform jeopardize the ambitious eu climate change objectives abstract this paper examines the effects of replacing current fuel taxes by a system of taxes that account better for all the different external costs of the different transport modes one of the important implications of this reform is that current fuel taxes are decreased to a level of 80 euro ton of co 2 but that the mileage related taxes on car and truck use increase using the tremove model for the transport sector of 31 european countries one finds that the volume of transport will decrease because current taxes on transport are too low compared to overall external costs overall co 2 emissions will decrease slightly using the markal times model for the belgian energy sector putting all sectors and technologies on equal footing shows that a fuel tax reform makes that it is not cost efficient to require large co 2 emission reductions in the transport sector and that traditional car technologies will continue to dominate the car market in 2020 2030

intercountry comparisons of labor force trends and of related developments an overview this paper is a survey of analyses of women s labor force growth in 12 industrialized countries originally presented at a conference in sussex england in june 1983 the main focus of the conference papers and of the current survey is on growth of the labor force of married women in the years 1960 80 trends in fertility wages and family instability also receive attention as related developments married women s labor force growth is observed in all countries except for the ussr after 1970 where labor force rates of women reached the level of men growth rates differ among countries they apparently respond to growth in real wages and to growth in education but response elasticities differ among countries estimates of these elasticities contained in the country papers were helpful in predicting the trends other findings include ubiquitous declines in fertility and growth of divorce in the 1970s both developments are related to long run labor force growth in all countries wages of women were lo

politics and exchange rate forecasts abstract standard exchange rate models perform poorly in out of sample forecasting when compared to the random walk model we posit part of the poor performance of these models may be due to omission of political factors we test this hypothesis by including political variables that capture party specific election specific and candidate specific characteristics surprisingly we find our political model outperforms the random walk in out of sample forecasting at 1 12 month horizons for the pound dollar mark dollar pound mark and the trade weighted dollar mark and pound exchange rates

capital flight and political risk abstract this paper provides the first serious attempt to examine the relationship between political risk and capital flight for a large set of developing countries the outcomes of the analysis show that in most cases political risk variables do have a statistically robust relationship to capital flight once domestic and international macroeconomic circumstances are added at least when the robustness test as proposed by sala i martin is applied we conclude that on the basis of the analysis in this paper we have found support for the hypothesis that political risk leads to increased capital flight

the marginal cost of public funds hours of work versus labor force participation this paper extends the theory and measurement of the marginal cost of public funds mcf to account for labor force participation responses our work is motivated by the emerging consensus in the empirical literature that extensive participation responses are more important than intensive hours of work responses in the modelling of extensive responses we argue that it is crucial to account for the presence of non convexities created by fixed work costs in a non convex framework tax and transfer reforms give rise to discrete participation responses generating first order effects on government revenue these revenue effects make the marginal cost of funds higher and we show numerically that the implications for mcf tend to be substantial

potential performance and tests of portfolio efficiency abstract the potential performance of an asset set may be obtained by choosing the portfolio proportions to maximize the sharpe 1966 performance measure if a portfolio has a sharpe measure equivalent to the potential performance of the underlying set of assets then it is efficient multivariate statistical procedures for comparing potential performance and testing portfolio efficiency are developed and then evaluated using simulations two likelihood ratio statistics are then used to compare stock and bond indices against sets of 20 and 40 portfolios the procedures are also compared to the gibbons 1982 methodology for testing financial models

anomalies foreign exchange most all behavior can be explained by assuming that agents have stable well defined preferences and make rational choices consistent with those preferences in markets that eventually clear an empirical result qualifies as an anomaly if it is difficult to rationalize or if implausible assumptions are necessary to explain it within the paradigm this column will present a series of such anomalies readers are invited to suggest topics for future columns by sending a note with some reference to or better yet copies of the relevant research comments on anomalies printed here are also welcome the address

term premia and inflation uncertainty empirical evidence from an international panel dataset comment term premia implied by maximum likelihood estimates of affine term structure models are misleading because of small sample bias we show that accounting for this bias alters the conclusions about the trend cycle and macroeconomic determinants of the term premia estimated in wright 2011 his term premium estimates are essentially acyclical and often just parallel the secular trend in longterm interest rates in contrast bias corrected term premia show pronounced countercyclical behavior consistent with theoretical and empirical arguments about movements in risk premia jel e31 e43 e52 g12 h63 in an important recent paper wright 2011 presents a new international interest rate dataset and estimates term premia in far ahead forward rates using an affine gaussian dynamic term structure model dtsm as well as a survey based method he then relates these empirical term premia to macroeconomic conditions notably inflation uncertainty in particular he shows that the marked secular decline in estimated forward term premia across countries is correlated with decreases in measures of uncertainty around forecasts of future inflation in this comment we demonstrate that his model based term premium estimates are distorted by smallsample bias in the estimated model parameters accounting for this bias changes the behavior of the resulting term premium estimates in terms of their trend and cyclical behavior in an affine gaussian dtsm bond yields are determined by a small number of risk factors and the dynamic evolution of these risk factors follows a gaussian vector autoregression var if the risk factors in such a model are observable and if the model is maximally flexible i e if it has no parameter restrictions beyond those required for identification we know from joslin singleton and zhu 2011 that the maximum likelihood estimates of the var parameters can be found by

the use of technical analysis in the foreign exchange market abstract technica or chartist analysis of financial markets involves providing forecasts or trading advice on the basis of largely visual inspection of past prices without regard to any underlying economic or fundamental analysis this paper reports the results of a questionnaire survey conducted on behalf of the bank of england among chief foreign exchange dealers based in london in november 1988 amongst other findings it is revealed that at least 90 per cent of respondents place some weight on this form of non fundamental analysis when forming views at one or more time horizons there is also a skew towards reliance on technical as opposed to fundamentalist analysis at shorter horizons which becomes steadily reversed as the length of horizon considered is increased a very high proportion of chief dealers view technical and fundamental analysis as complementary forms of analysis and a substantial proportion suggest that technical advice may be self fulfilling jel f31

equal employment opportunity in japan a view from the west the japanese equal employment opportunity law of 1985 effective in april 1986 prohibits gender discrimination with respect to recruitment hiring promotion training and job assignment the author describes the law and assesses its probable impact on the economic opportunities of japanese women she argues that two aspects of japan s socioeconomic environment the lifetime employment system used by large japanese private firms and the labor supply pattern of japanese women make it unlikely that the law will have a large impact on the economic status of women in japan

employment tenure and earnings profiles in japan and the united states comments the relationship between job tenure and annual earnings in japan has received considerable attention from social scientists examining employment contracts and the japanese compensation system in their widely cited article masanori hashimoto and john raisian 1985 using data for 1980 showed that japanese men have greater job tenure than comparable workers in the united states and that the earnings of japanese men rise more rapidly with increased tenure they found that an additional year of tenure increases earnings in both small and large firms in japan more than does an additional year of general market experience their results for the united states indicate that general market experience increases earnings more than an additional year of job tenure the 1970 s and 1980 s were a period of substantial change in japanese labor markets due to the rapid aging of the population and the restructuring of the economy following the oil crisis the present analysis extends the work of hashimoto and raisian by estimating earnings equations for japanese men for the years 1971 1976 1981 and 1986 specifically we wish to investigate whether hashimoto and raisian s findings have been stable over time or whether changes in the labor market have altered the importance of tenure relative to total labor market experience in the japanese labor market i changes in the labor market

a monte carlo investigation of the accuracy of multivariate capm tests abstract in a multivariate regression model relating individual returns to the market return capm implies non linear restrictions on the parameters several asymptotically valid tests of these restrictions have been suggested the existing monte carlo evidence shows that some of these tests are unreliable for reasonable sample sizes but does not indicate well which tests are reliable this paper reports the results of an extensive monte carlo experiment shanken s csr test and jobson and korkie s corrected likelihood ratio test are quite accurate in all cases we consider

global political risk and currency momentum using a measure of political risk relative to the united states that captures unexpected political conditions we show that political risk is priced in the cross section of currency momentum and contains information beyond other risk factors our results are robust after controlling for transaction costs reversals and alternative limits to arbitrage the global political environment affects the profitability of the momentum strategy in the foreign exchange market investors following such strategies are compensated for the exposure to the global political risk of those currencies they hold that is the past winners and exploit the lower returns of loser portfolios the risk compensation is mainly justified by the different exposures of foreign currencies in the momentum portfolio to u s political shocks which is the main component of global political risk

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

covered interest parity a high frequency high quality data study profitable deviations from covered interest parity cip represent riskless arbitrage opportunities and so indicate market ineffic iency previous empirical work on cip uses noncontemporaneously sampl ed data and reports mixed results this paper uses high frequency te n minute high quality data gathered personally by the author in th e london foreign exchange market to test the cip condition the resu lts overwhelmingly support the market efficiency hypothesis copyright 1987 by the review of economic studies limited