Homework #3

Ryoichi Imai

2003/10/25

Due: Wednesday, December 15, 2004.

The purpose of this homework is to provide an opportunity to have your own understandings of the reading materials in ahead of the class discussion. Type your answers on A4 papers.  At the top of your homework, type your name and e-mail address.

If you fail in submitting your work in the class hour, you can leave it in my mailbox, located at the ground level of the International Student Center. 

The numbers in ( ) represent the corresponding pages. Write your answers in your own words. Never copy a large part of the paragraph, even if you do not know the answer. 

A. Answer to the following questions, based on Chapter 3, "Exchange Rates" of Japan's Lost Decade by Hiroshi Yoshikawa. 

  1. What is the Bretton Woods System? How were the values of currencies linked to the US dollar and gold? (84)

  2. What does the "buyer/seller of last resort" mean under the fixed exchange rate system? (85)

  3. Why do governments maintain some foreign currency reserves even under the floating exchange rate system? (86)

  4. Why do market players behave as if they were participating a "beauty contest"? (88)

  5. What is the "Purchasing Power Parity"? (89)

  6. There is no physical productivity difference of taxies in Japan and Australia. Why is the taxi service in Tokyo as six times expensive as in Sydney? (92)

  7. State the two reasons to explain the price difference of nontradables across countries? (93)

  8. There is still a large gap in living standards between Tokyo and New York.. What does this mean? Is this a bad thing or good thing? (94)

  9. Is there a theory that predict that the PPP based on living standards converge with the actual exchange rates? (94)

  10. What is the difference between the PPP based on tradables and the PPP based on living standards? (95)

  11. Why did Japan experience a "lost decade" in 1920? Explain it using the words "exchange rate misalignments"? (96)

  12. How did Takahashi succeed in stimulating the Japanese economy, which were suffering from the overvalued fixed exchange rate? (97)

  13. What are the two possible explanations for the long-term appreciation of the yen? (98)

  14. Why did the yen appreciation over the past 25 years occur? (99)

  15. Pick up two examples of occasional misalignments in the actual exchange rates? (100)

B. Answer to the following questions, based on Chapter 4, "Japan's Manufacturing and Nonmanufacturing Industries" of Japan's Lost Decade by Hiroshi Yoshikawa. 

  1. What is the "value-added" productivity, which is different from the physical productivity? Explain it by a example of the restaurant industry? (108)

  2. Along the growth path, what can we say about the GDP share of the primary, secondary, and tertiary sectors? (110)

  3. Why has the GDP share of the tertiary sector been increasing, although the productivity growth of the service industry is much slower than that of the manufacturing industry? (111)

  4. What is the big problem of the Japanese economy that we can learn from Fig.4-1? (113)

  5. What can we learn from Table 4-4? (a) What is the long-run trend in the employment categories? (b) What is the distinctive feature of the employment categories in comparison with other advanced countries? (117)

  6. Why did the SMEs survive while the Japan's economy had moved into an entirely new phase around 1970? (119)

  7. What is the source of inefficiency of Japan's construction industry? And how is it inefficient? (120)

  8. State the two different issues which are currently confused in Japan's agriculture controversy? Explain the situation using an extreme case. (124)

  9. Why agriculture households hold financial assets that are more than 50% higher than the average for all households? (125)

  10. Why are farmers so unwilling to sell their lands? (126) 

  11. Why did the crash of the bubble economy bring the harsh condition on the nonmanufacturing industries? (130)

  12. Why did the deregulation and the IT revolution deteriorate the profitability of local electric shops and small town booksellers? (131)

  13. What is wrong in Fig. 4-2? (132)

  14. What can we learn from Table 4-6? (133)

  15. How did the poor performances of SMEs affect the recession of the 1990s? (133)