This paper presents a quantitative evaluation of the effect on the yen of some alternative scenarios under which Japan reaches current account balance. The analytical framework is a global general equilibrium model, based closely on Obstfeld and Rogoff (2005a, b), within which relative prices clear the world markets for traded goods as well as the domestic markets for nontraded goods. Depending on assumptions about the critical substitution elasticities underlying the model, the yen could appreciate by as much as 10 percent for each 1 percent of GDP reduction in its current account surplus. The effect would be smaller if substitution elasticities were larger, or if adjustment were accompanied by an expansion of Japanese nontradable output, the latter presumably implied by a return to a more efficient level of labor utilization.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.
Volume (Year): 24 (2006) Issue (Month): S1 (December) Pages: 27-38 Download reference. The following formats are available: HTML,
plain text,
BibTeX,
RIS (EndNote),
ReDIF
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: