• The bursting of housing bubble as jamming phase transition
  Katsuhiro NishinariMitsuru IwamuraTsutomu WatanabeYukiko Umeno Saito

  Abstract

  Recently housing market bubble and its burst attracts much interest of researchers in various fields including economics and physics. Economists have been regarding bubble as a disorder in prices. However, this research strategy has overlooked an importance of the volume of transactions. In this paper, we have proposed a bubble burst model by focusing on transaction volume incorporating a traffic model that represents spontaneous traffic jam. We find that the phenomenon of bubble burst shares many similar properties with traffic jam formation on highway by comparing data taken from the U.S. housing market. Our result suggests that transaction volume could be a driving force of bursting phenomenon.

  Introduction

  Fluctuations in real estate prices have substantial impacts on economic activities. For example, land prices in Japan exhibited a sharp rise in the latter half of the 1980s, and its rapid reversal in the early 1990s. This large swing had led to a significant deterioration of the balance sheets of firms, especially those of financial firms, thereby causing a decade-long stagnation of the Japanese economy, which is called Japan’s “lost decade”. A more recent example is the U.S. housing market bubble, which started somewhere around 2000 and is now in the middle of collapsing. This has already caused substantial damages to financial systems in the U.S. and the Euro area, and it is expected that it may spread worldwide as in the case of the Great Depression in the 1920s and 30s.

  2009.05

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• Do Larger Firms Have More Interfirm Relationships?
  Mitsuru IwamuraTsutomu WatanabeYukiko Umeno Saito

  Abstract

  In this study, we investigate interfirm networks by employing a unique dataset containing information on more than 800,000 Japanese firms, about half of all corporate firms currently operating in Japan. First, we find that the number of relationships, measured by the indegree, has a fat tail distribution, implying that there exist “hub” firms with a large number of relationships. Moreover, the indegree distribution for those hub firms also exhibits a fat tail, suggesting the existence of “super-hub” firms. Second, we find that larger firms tend to have more counterparts, but the relationship between firms’ size and the number of their counterparts is not necessarily proportional; firms that already have a large number of counterparts tend to grow without proportionately expanding it.

  Introduction

  When examining interfirm networks, it comes as little surprise to find that larger firms tend to have more interfirm relatioships than smaller firms. For example, Toyota purchases intermediate products and raw materials from a large number of firms, located inside and outside the country, and sells final products to a large number of customers; it has close relationships with numerous commercial and investment banks; it also has a large number of affiliated firms. Somewhat surprisingly, however, we do not know much about the statistical relationship between the size of a firm and the number of its relationships. The main purpose of this paper is to take a closer look at the linkage between the two variables.

  2007.03

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• Massive Money Injection in an Economy with Broad Liquidity Services: The Japanese Experience 2001-2006
  Mitsuru IwamuraShigenori ShiratsukaTsutomu Watanabe

  Abstract

  This paper presents a model with broad liquidity services to discuss the consequences of massive money injection in an economy with the zero interest rate bound. We incorporate Goodfriend’s (2000) idea of broad liquidity services into the model by allowing the amounts of bonds with various maturities held by a household to enter its utility function. We show that the satiation of money (or the zero marginal utility of money) is not a necessary condition for the one-period interest rate to reach the zero lower bound; instead, we present a weaker necessary condition that the marginal liquidity service provided by money coincides with the marginal liquidity service provided by the one-period bonds, both of which are not necessarily equal to zero. This result implies that massive money injection would have some influences on an equilibrium of the economy even if it does not alter the private sector’s expectations about future monetary policy. Our empirical results indicate that forward interest rates started to decline relative to the corresponding futures rates just after March 2001, when a quantitative monetary easing policy started by the Bank of Japan, and that the forward and futures spread has never closed until the policy ended in March 2006. We argue that these findings are not easy to explain by a model without broad liquidity services.

  Introduction

  Recent researches on the optimal monetary policy in an economy with the zero interest rate bound have found the importance of a central bank’s commitment about future monetary policy (Woodford (1999), Jung et al. (2005), Eggertsson and Woodford (2003) among others). In a usual environment, a central bank conducts monetary easing by lowering the current overnight interest rate through an additional injection of money to the market. However, this does not work well once the overnight interest rate reaches the zero lower bound. Further monetary easing in such a situation could be implemented only through central bank’s announcements about the future path of the overnight interest rate. Specifically, it has been shown that the optimal monetary policy rule is characterized by “history dependence” in the sense that a central bank commits itself to continuing monetary easing even after the economy returns to a normal situation.

  2006.11

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