The Inverted Fisher Hypothesis: Inflation Forecastability and Asset Substitution

This paper examines the implications of inflation persistence for the inverted Fisher hypothesis that nominal interest rates do not adjust to inflation because of a high degree of substitutability between money and bonds. It is emphasized that the substitutability between nominal assets and capital renders the hypothesis inconsistent with the data when inflation persistence is high. Using a switching regression model, the analysis allows the reflection of inflation in interest rates to vary according to the degree of inflation persistence or forecastability. The hypothesis is supported by U.S. data only when inflation forecastability is below a certain threshold. Copyright 2002, International Monetary Fund

Significance of Development Stage Theory for Explaining Industrial Growth Pattern between Asian NICs and Selected Advanced Economies

The East Asian miracle was real. Prior to the 1997 economic and currency crises, Asian NICs — Hong Kong, Korea, Singapore and Taiwan — achieved remarkable annual GDP growth. In these countries the overall economic performance was significantly determined by the industrial development triggered by changes in domestic demand, increases in FDI, intensive innovation efforts of indigenous firms, and export expansion of manufactured goods. Furthermore, fast economic growth and active state interventions like those adopted in most NICs were accompanied by various structural changes in the industrial sector. This study examines the applicability of the development stage theory for explaining the growth dynamics of industrial production in Asian NICs for the period 1980-95 and compares their specialisation pattern with that of more advanced economies like Japan, West Germany and the US.development stage theory, industrial growth and specialisation, Asian NICs, Japan, West Germany, the US

Effects of Tax Depreciation Rules on Firms' Investment Decisions in an Inflationary Phase: Comparison of Net Present Values in Selected OECD Countries

This study compares incentive effects of various tax depreciation methods which are currently employed in selected OECD countries. Their generosity is determined on the basis of Samuelson’s true economic depreciation. For this purpose, the present value model is applied. The central issue is that the so-called historical cost accounting method, which is adopted in practice when calculating the corporate tax base, causes fictitious profits in inflationary phases that should also be taxed. Therefore, in periods with inflation generous tax depreciation provisions do not adequately promote private investment as designed, but partly compensate such losses caused by inflation.true economic depreciation, tax depreciation rules,corporate tax, investment decision, net present value model,inflation, OECD

A branch and bound and simulated annealing approach for job shop scheduling

This paper presents two approaches to the solution of the job shop scheduling problem, namely the branch and bound, and simulated annealing approach. The objective is to schedule the jobs on the machines so that the total completion time is minimized. In the branch and bound approach, the job shop scheduling problem is represented by a disjunctive graph, then the optimal schedule is obtained using the branch and bound algorithm while simulated annealing is a local search based algorithm which will slightly perturb the initial feasible solution to decrease the makespan