Estimating a dynamic stochastic general equilibrium model for Japan

Tomohiro Sugo, Kozo Ueda

Research output: Contribution to journalArticlepeer-review

38 Citations (Scopus)

Abstract

We estimate a medium-scale dynamic stochastic general equilibrium model of the Japanese economy following Christiano et al. [Christiano, L., Eichenbaum, M., Evans, C., 2005. Nominal rigidities and the dynamic effects of a shock to monetary policy. J. Polit. Economy 113 (1), 1-45]. By using actual capital utilization data and modifying the formulation of utilization following Greenwood et al. [Greenwood, J., Hercowitz, Z., Huffmann, G.W., 1988. Investment, capacity utilization, and the real business cycle. Amer. Econ. Rev. 78 (3), 402-417], this paper succeeds in incorporating a negative correlation between capital utilization and rental costs to explain actual capital utilization rates. We find that an investment adjustment cost shock is as important as a productivity shock that affects business cycles. We also find hump-shaped and persistent behavior of inflation rates in response to a monetary policy shock, which Christiano et al. cast doubt upon. J. Japanese Int. Economies 22 (4) (2008) 476-502.

Original languageEnglish
Pages (from-to)476-502
Number of pages27
JournalJournal of The Japanese and International Economies
Volume22
Issue number4
DOIs
Publication statusPublished - 2008 Dec 1
Externally publishedYes

Keywords

  • Capital utilization
  • DSGE model
  • Japan
  • Monetary policy

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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