This paper focuses on the recently developing financial derivatives markets, and examines the usefulness of option prices as an information variable for monetary policy implementation. A set of option prices provides us with information on the entire probability distribution of the future values...

In Japan, the Consumer Price Index (CPI) is widely used as a measure of inflation or the cost of living. The CPI is constructed by using a fixed-weight Laspeyres formula. This formula is used mainly because of its ease of calculation and comprehension, thus limiting the total cost of...

Since the late 1980s, the Japanese has experienced tremendous rise and fall of asset prices and large fluctuations of real economic activity, while general price level has remained relatively stable. Such developments raised a question of whether monetary policy should have targeted asset prices...

This paper proposes a testable continuous-time term-structure model with recursive utility to investigate structural relationships between the real economy and the term structure of real and nominal interest rates. Under mean-reverting expectation on real output growth and inflation, this paper...

This paper presents a new approach for modeling an optimal debt contract. It examines a competitive contract design in a continuous-time environment with Markov income shocks and costly verifiable information. It shows that an ex ante optimal contract has the form of a debt contract that...

We provide a theoretical and numerical framework to study optimal insurance design under asymmetric information. We consider a continuous-time model where neither the efforts nor the outcome of an insured firm are observable to an insurer. The insured may then cause two interconnected...

This paper presents a new approach for modeling an optimal debt contract in continuous time. It examines a competing contract design in a continuous-time environment with Markov income shocks and costly veri able information. It shows that an optimal contract has the form of a long-term debt...

This paper studies a strategic role of debt restructuring under an optimal debt contract. It explores an infinite-horizon costly-monitoring model under Markov income shocks. It shows that, if (1) a borrower's project is expected to be profitable, (2) a lender's outside options are positively...