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Accounting for Japanese Business Cycles: A Quest for Labor Wedges

  • Keisuke Otsu

    ()

The Japanese business cycle from 1980-2007 portrays less contemporaneous correlation of labor with output than in the U.S. and also tends to lead output by one quarter. A canonical real business cycle model cannot account for these facts. This paper uses the business cycle accounting method a la Chari, Kehoe and McGrattan (2007) and shows that efficiency and labor market distortions are important in accounting for the quarterly business cycle fluctuation patterns in Japan. Fiscal and monetary variables such as labor income tax, money growth and interest rates cannot fully account for the distortions in the Japanese labor market.

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File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/1106.pdf
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Paper provided by School of Economics, University of Kent in its series Studies in Economics with number 1106.

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Date of creation: Apr 2011
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Handle: RePEc:ukc:ukcedp:1106
Contact details of provider: Postal: School of Economics, University of Kent, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 827497
Web page: http://www.kent.ac.uk/economics/

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  1. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June.
  2. Fumio Hayashi & Edward C. Prescott, 2002. "Data Appendix to The 1990s in Japan: A Lost Decade," Technical Appendices hayashi02, Review of Economic Dynamics.
  3. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," RCER Working Papers 155, University of Rochester - Center for Economic Research (RCER).
  4. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, 05.
  5. Keiichiro Kobayashi & Masaru Inaba, 2005. "Business Cycle Accounting for the Japanese Economy," Discussion papers 05023, Research Institute of Economy, Trade and Industry (RIETI).
  6. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 82(2), pages 346-53, May.
  7. R. Anton Braun & Julen Esteban-Pretel & Toshihiro Okada & Nao Sudou, 2005. "A Comparison of the Japanese and U.S. Business Cycles," CIRJE F-Series CIRJE-F-392, CIRJE, Faculty of Economics, University of Tokyo.
  8. Lawrence J. Christiano & Joshua M. Davis, 2006. "Two flaws in business cycle accounting," Working Paper Series WP-06-10, Federal Reserve Bank of Chicago.
  9. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
  10. Fumio Hayashi & Edward C. Prescott, 2004. "The 1990s in Japan: a lost decade," Chapters, in: The Economics of an Ageing Population, chapter 2 Edward Elgar.
  11. Anton Braun, R., 1994. "Tax disturbances and real economic activity in the postwar United States," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 441-462, June.
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