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The Dynamic Effects of Japanese Macroeconomic Policies: Were There Any Changes in the 1990s?

Listed author(s):
  • IIDA Yasuyuki
  • MATSUMAE Tatsuyoshi
Registered author(s):

    This study investigates changes in the contemporary Japanese economics and the effects of macroeconomic policies in the 1990s. We estimate several vector autoregression (VAR) models employing data detrended by different methods. This paper presents three major findings: First, there is a gradual decline in the influences of fiscal policy. Second, there is no decline in the impact of changes in the interest rate. Third, there has been a collapse in the linkage of monetary aggregates and real economy. These findings force us to reconsider the planning and designing of macroeconomic policies. Additionally, in each estimation we find strong tendency of so-called "price puzzle," which require us more investigation to theoretical model we rely.

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    File URL: http://www.esri.go.jp/jp/archive/e_dis/e_dis209/e_dis209.pdf
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    Paper provided by Economic and Social Research Institute (ESRI) in its series ESRI Discussion paper series with number 209.

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    Length: 29 pages
    Date of creation: Mar 2009
    Handle: RePEc:esj:esridp:209
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    1. Yoshiyasu Ono, 2006. "Fallacy of the Multiplier Effect: Correcting the Income Analysis," ISER Discussion Paper 0673, Institute of Social and Economic Research, Osaka University.
    2. Bayoumi, Tamim, 2001. "The morning after: explaining the slowdown in Japanese growth in the 1990s," Journal of International Economics, Elsevier, vol. 53(2), pages 241-259, April.
    3. Jordi Galí & J. David López-Salido & Javier Vallés, 2007. "Understanding the Effects of Government Spending on Consumption," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 227-270, 03.
    4. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    5. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    6. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    7. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
    8. Miyao, Ryuzo, 2002. "The Effects of Monetary Policy in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 376-392, May.
    9. URASAWA Satoshi, 2007. "Business Cycle Fluctuations in Japanese Macroeconomic Time Series:1980-2000," ESRI Discussion paper series 185, Economic and Social Research Institute (ESRI).
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