Taiji Furusawa is professor at the Graduate School of Economics, University of Tokyo. He has a MA of economics at Hitotsubashi University and received his PhD of economics from University of Wisconsin-Madison in 1994. Before he joined the faculty of University of Tokyo, he has taught at Brandeis University, Fukushima University, Yokohama National University, and Hitotsubashi University. He visited Boston University from 2001 to 2002 as a Fulbright Scholar and Harvard University as an Abe Fellow and a Research Associate of the Program on U.S.-Japan Relations from 2010 to 2012. He has received Kiyoshi Kojima Award (Japan Society of International Economics) in 2007, Japan Academy Medal (Japan Academy) and JSPS Prize (Japan Society for the Promotion of Science) in 2009, and IEFS Japan Koji Shimomura Award in 2014 for his research accomplishment in the field of International Trade. He has also participated in the Japanese-French Frontier of Science Symposiums as a planning group member and a planning committee member.
Award Information
The purpose of the research project is to advance international trade theory by incorporating the finance side of the economy. Economists have traditionally looked at the real side of the economy (i.e., trade in goods and services) and the monetary side separately. This new study that I have proposed is one of the first attempts to integrate these two. As we all know from the current financial crisis, the financial condition of the economy seriously affects activities of firms. In order to derive reliable policy implications, therefore, it is important to take account of the finance side of the economy when we build economic models. This idea has been overlooked more or less especially in the field of international trade. The quality of financial institution is a critical factor in determining the industrial structure of a country and hence the pattern of international trade. I plan to theoretically investigate how the traditional trade theory should be modified when the financial institution is imperfect (i.e., there exist financial frictions so that firms are only able to borrow insufficient amount of money). I have written a paper with Noriyuki Yanagawa (Furusawa and Yanagawa, 2009) on this topic. We have theoretically investigated the impact of financial imperfection on the market structure of an industry in which there are many entrepreneurs with different initial wealth levels and some entrepreneurs, whose wealth levels are not enough to cover the investment costs, must rely on external finance. I plan to extend this study in several directions. First, I plan to build a more-general, multi-industry, international trade model with financial frictions to see how the results of our paper should change when inter-industry adjustment may occur in response to international trade in goods and capital movement. Second, I would like to endogenize the quality of the financial institution, by accommodating political and legal systems explicitly into the model. To this end, I will pay a special attention to industries’ lobbying activities whose intensities are seriously affected by free-riding incentives, since financial imperfection causes firm heterogeneity within an industry, which in turn affects firms’ free-riding incentives. Third and finally, I plan to extend our model into a dynamic one, so that we can see among others (i) the impact of financial imperfection on the stationary wealth distribution, (ii) the impact of international trade and capital movement on the wealth distribution under financial imperfection, and (iii) how the heterogeneity in wealth distribution affects economic growth. It is only quite recently that the financial side of the economy is accommodated into international trade model, although its importance has long been recognized. My study is quite novel, and will be likely to have a large impact on this new area of research.
