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Cyclical Activity and Inflation under Secular Stagnation: Empirical Evidence Using Data on Japan's Lost Decades

Author

Listed:
  • Masahiko Shibamoto

    (Research Institute for Economics and Business Administration and Center for Computational Social Science, Kobe University, JAPAN)

Abstract

This paper disputes the suspicions about the existence and stability of the trade-off between nominal inflation and the real economy when missing deflation and reinflation under secular stagnation by providing empirical evidence of the stability of this short-run trade-off. To this end, we construct a simple measure of demand-pull pressures, namely the cyclical activity index, using time-series data for a period that includes Japan's secular stagnation. We then quantitatively examine the relationship between inflation and the measured cyclical activity. The empirical results support that the cyclical activity index has a stable and economically meaningful relationship with short-term inflation.

Suggested Citation

  • Masahiko Shibamoto, 2022. "Cyclical Activity and Inflation under Secular Stagnation: Empirical Evidence Using Data on Japan's Lost Decades," Discussion Paper Series DP2022-32, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2022-32
    as

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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2022-32.pdf
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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