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External Shocks and Japanese Business Cycles: Evidence from a Sign-Restricted VAR

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  • Hiroshi Morita

Abstract

This paper investigates the sources of Japanese business fluctuations since the 1990s taking into account both external shocks (e.g., risk premium and foreign demand shock) and domestic supply and demand shocks. We use the sign-restricted VAR model based on the theoretical model to identify these. The presented results show that 20% to 40% of the forecast error variances in output can be explained by external shocks. Further, we demonstrate that supply shocks are the main influencing factor in Japanese business fluctuations throughout the sample period and that risk premium shocks have played an important role in post-2008 Lehman shock recession.

Suggested Citation

  • Hiroshi Morita, 2013. "External Shocks and Japanese Business Cycles: Evidence from a Sign-Restricted VAR," Global COE Hi-Stat Discussion Paper Series gd12-277, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd12-277
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd12-277.pdf
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    References listed on IDEAS

    as
    1. Fumio Hayashi & Edward C. Prescott, 2004. "The 1990s in Japan: a lost decade," Chapters, in: Paolo Onofri (ed.), The Economics of an Ageing Population, chapter 2, Edward Elgar Publishing.
    2. Gupta-Kapoor Anju & Ramakrishnan Uma, 1999. "Is There A J-Curve? A New Estimation for Japan," International Economic Journal, Taylor & Francis Journals, vol. 13(4), pages 71-79.
    3. Evi Pappa, 2009. "The Effects Of Fiscal Shocks On Employment And The Real Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 217-244, February.
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    Cited by:

    1. Suliman Zakaria S. Abdalla, 2014. "The Impact of Oil Price Fluctuations on the Sudanese Stock Market Performance," Working Papers 887, Economic Research Forum, revised Dec 2014.

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    More about this item

    Keywords

    External shock; DSGE model; sign-restricted VAR;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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