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The CAO Short-Run Macroeconometric Model of Japanese Economy (2003 version) - Basic Structure, Multipliers, and Economic Policy Analyses -(in Japanese)

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  • HORI Masahiro
  • AOKI Daiju

Abstract

This paper describes the basic structure and multipliers of the revised version of the CAO Short-Run Macroeconometric Model of the Japanese Economy, which was firstly released in 1998 (Hori et al. [1998]). The model is basically a demand-oriented, traditional Keynesian-type model with IS-LM-BP framework; however, it adopts recent developments in econometrics, such as co-integration, and error-correction to ensure a long-run equilibrium. Although the use of the new techniques stabilizes the long-run behaviors of the model, the short-run properties have not largely changed from the previous versions. The following are some of the multipliers of our policy simulations. The peak of fiscal multiplier, i.e., the effect of government investments on GDP, is about 1.1 in Japan. The effect of income tax reduction is smaller due to its leak to household savings. Monetary policy takes some time before its effects become evident.

Suggested Citation

  • HORI Masahiro & AOKI Daiju, 2003. "The CAO Short-Run Macroeconometric Model of Japanese Economy (2003 version) - Basic Structure, Multipliers, and Economic Policy Analyses -(in Japanese)," ESRI Discussion paper series 075, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esj:esridp:075
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