Institutional Complementarity and Macro-economic Stability

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First, in our research project, it was clarified theoretically and empirically what kind of combination between labor institutions and financial institutions brings about macroeconomic stability. The outline is as follows. It is well known that macroeconomic fluctuations are caused by various factors, the many of which are accompanied by the changes in investment. Investment fund is provided from two routes. The first one is the internal fund mainly based on profit, the second one is the external fund procured by capital market or banks. Labor institutions regarding employment and wages affect the elasticity of wage costs to the amount of production. Consequently, these institutions affect the elasticity of the amount of the profit and the internal fund. On the other hand, financial institutions influence the elasticity of the external fund. Thus, both labor institutions and financial institutions relate to macroeconomic dynamics through their influence on investment.Second, we analyze … More d theoretically and empirically the relation between public order and the monetary system, paying attention to institutional complementarities. Money has dual characteristics: public goods and private goods. This dualism cannot be overcome and people's credibility to money cannot be build by the legislation of the monetary system alone. The complementarities between monetary systems and other institutions such as the social security system or the fiscal system guarantees social stability of the monetary system, and plays the role to mediate money and public order.Thirdly, from the viewpoint of firms and nations, we analyzed how various economic subjects behaved when the institutional complementarities deteriorated and macroeconomic instability occurred. The existing institutional environment functions as a restriction against the reforms in firms. We clarified conditions for overcoming this restriction and the success of reforms. Moreover, we examined what kind of reforms in the fiscal policy and the social security system was preferable under a new kind of institutional complementarities. Less