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This paper analyzes the effects of dollarization, where a country (C) uses money produced by another country (M). We derive a general formula to determine the ''optimal'' rate of inflation, which maximizes M's welfare but does not take into account any loss to C. We show how this inflation varies with relative income size and output growth. Estimates of the ''optimal'' inflation rate are made for some countries. We also analyze a contract, under which M shares a fraction of total potential seigniorage with C to induce M to inflate at a rate which leads to no seigniorage accruing to M from C. Finally, we provide estimates of the present discounted value of the seigniorage accruing from M to C. Despite this loss, we estimate the net welfare gain to C's household when dollarization results in a lower rate of inflation.

Uncertainty about the future affects economic decisions today since there is an option value to postpone economic decisions. Using the economic policy uncertainty (EPU) indexes of policy categories developed by Baker et al. (2016), this study estimates the probit model to predict the recession probability in the United States, and quantifies the relative significance of the category-specific EPU indexes. The EPU index of national security is found relatively useful as predictors of recession. This category-specific measure of uncertainty provides information about the occurrence of recession that the other variables do not contain.

In recent years, Japan has experienced an unprecedented boom in foreign visitors Contribution/ OriginalityThis study is one of very few studies which have investigated international travel demand to Japan with statistically sound methods to analyze time series.

This paper analyzes the lead-lag relationships between construction investment and GDP at business-cycle frequency by the testsof Granger causality and the impulse responses in the framework of the vector autoregression, using the annual Japanese data.The analysis find that private construction investment tends to lead GDP, not vice versa, in the Granger sense and is of value in predicting the course of GDP one year ahead. Government construction investment, on the other hand, tends to lag GDP.