Uncertainty represented by volatilities in equity markets has been observed to be time-variable and lead output fluctuations. In the rational expectation framework, uncertainty with this nature needs exogenous variables with time-varying volatilities, but technology, tastes and fiscal and...

The paper offers a new explanation for the cause of the Great Inflation by constructing a model that explicitly separates the roles of government and monetary policymakers. A mechanism that inflation can accelerate even if an inflation target is low is uncovered. The model solves the puzzle of...

Empirically R&D expenditure moves pro-cyclically, but the pro- cyclicality is a puzzle from the Schumpeterian point of view. The paper examines the cyclical property of R&D expenditure in the context of endogenous growth, and concludes that (i) substitutability between investing in physical...

The elasticity of intertemporal substitution (EIS) at the macro level has been estimated mostly based on endowment economy models and these estimates are very sensitive to the choice of interest rates that are used for estimation. Estimates based on production economy models do not need...

The paper explores a fundamental mechanism of inflation by explicitly including a governmentfs optimization problem into a general equilibrium model assuming a Leviathan government. The result is clear- cut and beautiful: inflation is caused by the difference of the time preference rates between...

The paper examines a new possibility of output gaps in an economy without any rigidity. The driving force behind the new possibility is non-cooperative behavior of consumers. The paper shows that there is a possibility that when a fundamental shock hits an economy this non- cooperative nature...

The paper explores the impacts of heterogeneity in degree of relative risk aversion on the balance on current account in a two-country endogenous growth model. It concludes that, like the heterogeneity of demographic changes, the heterogeneity in degree of relative risk aversion generates...

Strategies for trade liberalization in developing countries when time preference rates are heterogeneous across countries are examined in the context of endogenous growth. The paper concludes that the best strategy for a developing country with the higher rate of time preference is generally the...

The paper explores an endogenous growth model in which scale effects asymptotically vanish and an economy grows without population growth. The key mechanism behind these features is substitution between investing in capital and in knowledge when firms face growing uncompensated knowledge...