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The Role of Cyclical Inflation: Evidence from Japan

Author

Listed:
  • Takuya Sakaguchi

    (Graduate School of Economics, Kobe University, JAPAN)

  • Masahiko Shibamoto

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

Abstract

Monitoring inflation is an important aspect of policymaking, but understanding the factors that drive inflation remains challenging. In this paper, we construct a cyclically sensitive inflation (CSI) index for Japan and examine its usefulness from several perspectives. Specifically, we investigate (1) the dynamic relationship from financial markets and the real economy to cyclical inflation, (2) how well cyclical inflation can predict future inflation trends, and (3) the effectiveness of the CSI as a real-time indicator of economic slack. Our empirical results show that the CSI can complement headline and core inflation measures and, when used together, help distinguish whether price changes are due to temporary factors or persistent pressures associated with the business cycle.

Suggested Citation

  • Takuya Sakaguchi & Masahiko Shibamoto, 2025. "The Role of Cyclical Inflation: Evidence from Japan," Discussion Paper Series DP2025-22, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2025-22
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2025-22.pdf
    File Function: First version, 2025
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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