News shocks and Japanese macroeconomic fluctuations

Jun-Hyung Ko, Kensuke Miyazawa and Tuan Khai Vu

Japan and the World Economy, 2012, vol. 24, issue 4, 292-304

Abstract: Are the changes in the future technology process, the so-called “news shocks,” the main contributors to the macroeconomic fluctuations in Japan over the past forty years? In this paper, we take two structural vector-auto-regression (SVAR) approaches to answer this question. First, we quantitatively evaluate the relative importance of news shocks among candidate shocks, estimating a structural vector-error–correction model (SVECM). Our estimated results suggest that the contribution of the TFP news shocks is nonnegligible, which is in line with the findings of previous works. Furthermore, we disentangle the source of news shocks by adopting several kinds of restrictions and find that news shocks on investment-specific technology (IST) also have an important effect. Second, to minimize the gap between the SVAR approach and the Bayesian estimation of a dynamic stochastic general equilibrium model, we adopt an alternative approach: SVAR with sign restrictions. The SVAR with sign restrictions reconfirms the results that the news shocks are important in explaining the Japanese macroeconomic fluctuations.

Keywords: TFP; Investment-specific technology; News shock; SVECM; Sign restriction (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:24:y:2012:i:4:p:292-304

DOI: 10.1016/j.japwor.2012.05.004

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