Dynamic Consumption Behavior: Evidence from Japanese Household Panel Data (Revised version)

Household consumption and saving behavior have been the central theme of recent macroeconomic literature. Following the work of Robert Hall (1978) and a series of papers by Fumio Hayashi, the focus of the literature has been on dynamic consumption behavior. Using the Family Income and Expenditure Survey (FIES), we conducted a dynamic panel analysis of consumption behavior. We examined intertemporal smoothing and the durability of consumption behavior with or without liquidity constraints. Our results are summarized as follows: (1) households with debt as well as debt-free households with low annual incomes and net savings faced disposable income constraints; (2) for these types of households, parameter values of lagged dependent variables between MLE and GMM are very close and therefore statistically significant and the implications for each remain more or less the same; (3) debt-free households with high annual incomes and net savings also faced a disposable income constraint in MLE that is not expected in the permanent income-lifecycle hypothesis.dynamic consumption, panel data, liquidity constraints

Enhancement of non-resonant dielectric cloaks using anisotropic composites

Cloaking techniques conceal objects by controlling the flow of electromagnetic waves to minimize scattering. Herein, the effectiveness of homogenized anisotropic materials in non-resonant dielectric multilayer cloaking is studied. Because existing multilayer cloaking by isotropic materials can be regarded as homogenous anisotropic cloaking from a macroscopic view, anisotropic materials can be efficiently designed through optimization of their physical properties. Anisotropic properties can be realized in two-phase composites if the physical properties of the material are within appropriate bounds. The optimized anisotropic physical properties are identified by a numerical optimization technique based on a full-wave simulation using the finite element method. The cloaking performance measured by the total scattering width is improved by about 2.8% and 25% in eight- and three-layer cylindrical cloaking materials, respectively, compared with multilayer cloaking by isotropic materials. In all cloaking examples, the optimized microstructures of the two-phase composites are identified as the simple lamination of two materials, which maximizes the anisotropy. The same performance as published for eight-layer cloaking by isotropic materials is achieved by three-layer cloaking using the anisotropic material. Cloaking with an approximately 50% reduction of total scattering width is achieved even in an octagonal object. Since the cloaking effect can be realized using just a few layers of the laminated anisotropic dielectric composite, this may have an advantage in the mass production of cloaking devices.Comment: 15 pages, 11 figure

Nonparametric Analysis of Random Utility Models

This paper develops and implements a nonparametric test of Random Utility Models. The motivating application is to test the null hypothesis that a sample of cross-sectional demand distributions was generated by a population of rational consumers. We test a necessary and sufficient condition for this that does not rely on any restriction on unobserved heterogeneity or the number of goods. We also propose and implement a control function approach to account for endogenous expenditure. An econometric result of independent interest is a test for linear inequality constraints when these are represented as the vertices of a polyhedron rather than its faces. An empirical application to the U.K. Household Expenditure Survey illustrates computational feasibility of the method in demand problems with 5 goods.Comment: 54 pages, 2 figure

The Big Mac Standard: A Statistical Illustration

We demonstrate a statistical procedure for selecting the most suitable empirical model to test an economic theory, using the example of the test for purchasing power parity based on the Big Mac Index. Our results show that supporting evidence for purchasing power parity, conditional on the Balassa-Samuelson effect, depends crucially on the selection of models, sample periods and economies used for estimations.Big Mac Index, Purchasing Power Parity, Panel Data

Changes in Equity Investment of Japan's Households After the Introduction of Defined Contribution Plans

Compared to other advanced economies, Japan's households allocate fewer financial assets to equity investment. We examine the possibility that the introduction of self-directed defined contribution plans could stimulate more equity investment by exposing investors to investment education and experience in equity investment. Using original data obtained from individual investors, we analyze factors associated with current and expected future equity allocation. Results indicate that although DC plan participation has no significant effect on current equity allocation, it significantly increases the expected future equity allocation. Financial asset holdings have a significant positive effect on current and expected future equity allocation. Interestingly, however, subjective expectations of future income and pension benefit, which are key factors in the life cycle model, do not have any significant impact.Equity Allocation, Defined Contribution Plans

The Effectiveness of Forecasting Methods Using Multiple Information Variables

This paper examines the effectiveness of forecasting methods using multiple information variables in forecasting the rate of changes in the consumer price index (CPI) and real GDP in Japan, and investigates the background of forecast performance improvement and its limitations. We first examine the performance of forecasts that use individual information variables as well as forecasts that use multiple information variables. The results show that no single variable improves forecasts in all periods for either CPI or GDP, but combining the information from individual forecasts can lead to a stable forecast performance. Next, to explore the backdrop to these improvements in forecast performance, we decompose and analyze the forecast error of forecast combinations using a simple mean. We discover that the irregular movements of forecast errors generally cancel each other out, which in turn leads to a reduction in errors. At the same time, the effect of reducing forecast errors rapidly diminishes with the addition of variables, and we verify that forecast performance stops improving after two to four variables are added. For this reason, it is necessary to consider both the performance of original forecast series that comprise the combination, and the combination of variables that best reduces the correlation among forecast error series to obtain the optimal combination of series.