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Estimating a DSGE Model for Japan: Evaluating and Modifying a CEE/SW/LOWW Model

Author

Listed:
  • Tomohiro Sugo

    (Bank of Japan)

  • Kozo Ueda

    (Bank of Japan)

Abstract

We estimate a medium-scale DSGE model of the Japanese economy following Christiano, Eichenbaum and Evans (2005), Smets and Wouters (2003) and Levin et al. (2005). By using actual capital utilization data and modifying the formulation of utilization following Greenwood, Hercowitz and Huffmann (1988), this paper succeeds in incorporating a negative correlation between capital utilization and rental costs to explain actual capital utilization rates. We find hump-shaped and persistent behavior of inflation rates in response to a monetary policy shock, which CEE cast doubt upon.

Suggested Citation

  • Tomohiro Sugo & Kozo Ueda, 2007. "Estimating a DSGE Model for Japan: Evaluating and Modifying a CEE/SW/LOWW Model," Bank of Japan Working Paper Series 07-E-2, Bank of Japan.
    • Handle: RePEc:boj:bojwps:07-e-2
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    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_2007/data/wp07e02.pdf
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    Citations

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    Cited by:

    1. de Groot, Oliver & Haas, Alexander, 2023. "The signalling channel of negative interest rates," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 87-103.
    2. Masaya Sakuragawa & Kaoru Hosono, 2010. "Fiscal Sustainability Of Japan: A Dynamic Stochastic General Equilibrium Approach," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 517-537, December.
    3. Braun, R. Anton & Körber, Lena Mareen, 2011. "New Keynesian dynamics in a low interest rate environment," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 2213-2227.
    4. McNelis, Paul D. & Yoshino, Naoyuki, 2016. "Finding stability in a time of prolonged crisis: Unconventional policy rules for Japan," Journal of Financial Stability, Elsevier, vol. 27(C), pages 122-136.

    More about this item

    Keywords

    DSGE model; monetary policy; capital utilization; Japan;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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