Institute of Economic Research
Kyoto University

THE RESEARCH CENTER FOR FINANCIAL ENGINEERING

This Center was established in 2000 to promote research in financial engineering. Here financial engineering is understood as a science for the functional efficiency of finance in view of effective utilization of capital and it includes such broad areas as asset pricing, derivative, investment, risk management, securitization, real options, etc. Of course, the Center puts a special focus on new developments in the no-arbitrage theory for pricing risk and the portfolio theory for managing risk, which form core theories for these areas. The Center has a visiting position for foreign scholars. Current research topics dealt with in the Center are; the convergence problem of finance and insurance from a viewpoint of financial engineering, pricing insurance risks, modeling prepayment risk in the mortgage-backed securities, application of real options to real estate, etc. Moreover, this center has two positions for foreign visitors. Every year we welcome professors from abroad.

PUBLIC POLICY DIVISION

Globalization, environmental problems, and aging population require the examination of an appropriate method for a new public policy of the modern society.　 In addition, sound financial policy is an urgent concern to solve the current troubles of the long-term stagnation of the Japanese economy.  
   This division studies the taxation system, social security and income re-distribution.  Its aim is to analyze a domain of issues related to environment, education, and finance system stabilization, in addition to what conventional public economics have mainly targeted.  The contemporary troubles of public policy can roughly be classified into three areas:  resource and environment policy, international public policy, and fiscal and financial policy.   Besides, the division aims to come up with concrete policies based on theoretical analyses derived from the statistical investigation of the real economy.
   In the "resources environment policy" area, the division examines widespread environmental problems including global warming problems.  The research method includes an interdisciplinary international joint program that includes extensive field research.
  The “international public policy” area is a field of new interdisciplinary study to analyze international public finance and public goods.  As resources and environmental policy and international public policy have close relevance, as is the problematic case of carbon dioxide reduction on the global scale, collaborative research of the two policy areas is particularly critical. 
  The "financial policy” area commits to the theoretical and empirical analyses to formulate the public side of financial policy such as social security, social welfare policy, education policy, and finance system stabilization policy in addition to macroeconomic stabilization policy.  Its aim is to suggest a desirable method of financial policy for the present time.  The public policy section thus aims at a dispatch foothold of a novel policy proposal for the problems of the contemporary economic society.

THE RESEARCH CENTER FOR ECONOMICS OF COMPLEX SYSTEMS

The aim of this division is to develop studies of planning theory and its applications for national, regional, and international economics.　　　　　　

(1) Methodological studies of planning aim to develop multidisciplinary quantitative analyses of economies growing and fluctuating endogenously. The following methods are used for this purpose. The bifurcation theory, the theory of the deterministic chaos, and the theory of the self-organization are a few examples."　　　　　　 

(2) As one method of quantitative analyses of macroeconomics and economic policy, research activities are also centered upon econometric model building and its applications to the Japanese economy. Among the current research agenda are: multisectoral model building, assessments of the longterm energy policy of Japan, multi-national modeling of flexible exchange rates, and simulation studies of labor market dynamics.

ECONOMIC INFORMATION ANALYSIS DIVISION

This research division, recognizing the scarcity of economic resources and the irreversibility of environmental degradation due to the human activities characterizing this era, such as production, distribution and consumption, aims at incorporating explicitly these issues and the problems they provoke into the analytical processes of modern economic systems.　　　　　　 

A study being undertaken in this division focuses on the comparison of various economic mechanisms and institutions of resource allocation. The term economic resource may be interpreted here in the broadest sense. It includes not only natural resources, but also capital goods and human resources. Development of natural resources as well as their allocation is affected by the institutional structure of society. Being fully aware that the theory of existing economics is mainly concerned with the mechanisms of market structure, study in this division also focuses on the public role of government and private sectors in the development and allocation of natural resources, and on the conflict and reconciliation of interests between those who bear the burden of the cost and risk and those who enjoy the benefits. The most serious consequence of human activities, in the course of allocation and utilization of the resources as defined above, is the potential deterioration of the environment, which may threaten human life in the coming century. Covering the natural and social environment, studies now under way are aimed at evaluating the effects of environmental control measures of the environment, which plan explicitly to purpose. Since the notion of such social costs as the adverse effect of pollution on human health, or research costs for abatement technology is largely dependent on the knowledge of other fields, this research division is intended for interdisciplinary cooperation with technology and the medical sciences.　　　　　　 

It has become one of the most important goals of this modern society to allocate resources in an appropriate way and to control the environment rationally. This research division pursues the analysis of alternative or appropriate technology and technology assessment, which may become the key technology to the further formulation of the so-called subjecthood of mankind in a free cooperative society. Social and economic effects of technological innovation on national and international economics including employment and industrial relations are also under analysis in connection with resource and environment problems.

ＥＣＯＮＯＭＩＣ　INSTITUTION　ＤＩＶＩＳＩＯＮ

The purpose of this study is to comprehend the generation and transformation of social and economic organizations, institutions and conventions, and the possibility of designing them in a broad perspective. This study will be based on the results of the comparison of socio-economic institutions and systems, the economic analysis of corporate organizations and of social decision-making processes. Focusing mainly on the analysis of institutions and organizations, this research promotes the game theoretic/microeconomic analysis, which plays an important role in studying them from a unifying perspective. The studies are categorized into the following three areas.

(1) Economic analysis of institutions includes designing, comparing and evaluating the economic institutions from a wide range of viewpoints. It is based on the empirical and theoretical study of various economic and socio-economic institutions and systems so that could be compared to the market economy, which is an overwhelmingly prevalent system. Moreover, the processes of the generation, evolution and transformation of institutions can be assessed from the dynamic viewpoint. This study is carried out not only in the political and historical perspectives but also with the techniques and insights used in the fields of sociology and engineering.

(2) Economic analysis of organizations deals with the analysis of the inner structure, formation and differentiation of organizations, the inter-organizational relationship and so on. By applying such techniques of economic analysis as are typified by the “Contract Theory”, it is possible to take up diverse organizations and phenomena as well as the corporate organizations as objects of the analysis. At the same time, the analysis focuses on feedback from empirical findings. It is also conducted in close coordination with related fields such as business administration and law.

(3) Game theory aims to construct a general theory of strategic situations, mainly dealing with issues such as: (1) enlarging a model of decision-making so that it reaches a better understanding of behavioral characteristics like self-interest, altruism and reciprocity, (2) developing a dynamic model of the evolution and learning of a strategic behavior, (3) establishing a fundamental theory on long-term relationships, bargaining and mechanism design.  This study is intended for a general, comprehensive analysis of the markets, in particular financial ones, as well as related institutions and organizations.