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Public Capital and Asset Prices: Time-series Evidence from Japan

Author

Listed:
  • Kazuki Hiraga

    () (School of Political Science and Economics, Tokai University)

  • Masafumi Kozuka

    () (Faculty of Economics, University of Marketing and Distribution Sciences)

  • Tomomi Miyazaki

    () (Graduate School of Economics, Kobe University)

Abstract

This research examines the effects of public infrastructure capital on asset prices in Japan over the periods from 1983:Q1 to 2008:Q4. The empirical results show that while public infrastructure capital forecasts the stock price returns and total factor productivity by Granger fs causality test after 1991, the contribution of public investment on stock returns is small by variance decomposition using Factor-Augmented VAR model. Our empirical evidence on the post high-growth era in Japan suggest that although public capital forecasts stock price returns and TFP, public infrastructure investment is not expected to play a key role of revitalizing capital markets. @

Suggested Citation

  • Kazuki Hiraga & Masafumi Kozuka & Tomomi Miyazaki, 2016. "Public Capital and Asset Prices: Time-series Evidence from Japan," Discussion Papers 1625, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1625
    as

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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2016/1625.pdf
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    References listed on IDEAS

    as
    1. Tomomi Miyazaki, 2014. "Fiscal Policy Effectiveness in Japan: Experiences from Recent Policies," Discussion Papers 1416, Graduate School of Economics, Kobe University.
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    3. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
    4. Takero Doi & Toshihiro Ihori, 2009. "The Public Sector in Japan," Books, Edward Elgar Publishing, number 12752, February.
    5. Luca Agnello & Ricardo M. Sousa, 2013. "Fiscal Policy And Asset Prices," Bulletin of Economic Research, Wiley Blackwell, vol. 65(2), pages 154-177, April.
    6. Cecchetti, Stephen G & Karras, Georgios, 1994. "Sources of Output Fluctuations during the Interwar Period: Further Evidence on the Causes of the Great Depression," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 80-102, February.
    7. Fukuda, Shin-ichi & Yamada, Junji, 2011. "Stock price targeting and fiscal deficit in Japan: Why did the fiscal deficit increase during Japan’s lost decades?," Journal of the Japanese and International Economies, Elsevier, vol. 25(4), pages 447-464.
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    12. Miyazaki, Tomomi, 2010. "The effects of fiscal policy in the 1990s in Japan: A VAR analysis with event studies," Japan and the World Economy, Elsevier, vol. 22(2), pages 80-87, March.
    13. Tokuo Iwaisako, 2010. "Japanese Macroeconomic Policy Management after the Global Financial Crisis," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(5), pages 795-806, June.
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    More about this item

    Keywords

    Public infrastructure capital in Japan; Stock price targeting; Lag-augmented VAR; Factor Augmented VAR;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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