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An empirical model for Japan’s business fixed investment

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  • Kurita, Takamitsu
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    Abstract

    This paper estimates a dynamic empirical model for Japan’s business fixed investment. A multivariate cointegration analysis of Japan’s time series data over the past two decades shows that the term spread (the difference between long-term and short-term interest rates) and various diffusion indices in the Bank of Japan’s business survey tend to synchronise with fixed investment. The term spread and diffusion indices are then all judged to be not only weakly exogenous but also super exogenous for parameters of interest. Thus, a single-equation equilibrium correction model for fixed investment is estimated with no loss of information and can be used for policy analysis. The equilibrium correction model sheds useful light on economic policies aimed at achieving stable investment growth in Japan.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 63 (2011)
    Issue (Month): 2 ()
    Pages: 107-120

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    Handle: RePEc:eee:jebusi:v:63:y:2011:i:2:p:107-120

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    Web page: http://www.elsevier.com/locate/jeconbus

    Related research

    Keywords: Business fixed investment; Term spread; Cointegration; Weak and super exogeneity; Equilibrium correction model;

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