Can IT be Japan's Savior?

Fumio Hayashi and Koji Nomura

No 11749, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s in Hayashi and Prescott (2002), our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital-output ratio. We also show that, to revive a 2% long-term growth in percapita GDP, Japan needs to direct 10% of private total hours to the IT sector.

JEL-codes: E2 O4 O5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-mac and nep-sea
Date: 2005-11
Note: ITI PR
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