Great Moderation in the Japanese economy

Jun-Hyung Ko and Koichi Murase

Japan and the World Economy, 2013, vol. 27, issue C, 10-24

Abstract: This paper investigates the contribution of technology and nontechnology shocks to the changing volatility of output and labor growth in the postwar Japanese economy. A time-varying vector autoregression (VAR) with drifting coefficients and stochastic volatilities is modeled and long-run restriction is used to identify technology shocks in line with Galí (1999) and Galí and Gambetti (2009). We find that technology shocks are responsible for significant changes in the output volatility throughout the total sample period while the volatility of labor input is largely attributed to nontechnology shocks. The driving force behind these results is the negative correlation between labor input and productivity, which holds significantly and persistently over the postwar period.

Keywords: Japanese economy; Great Moderation; Time-varying parameter VAR; Stochastic volatility; Technology shocks (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:27:y:2013:i:c:p:10-24

DOI: 10.1016/j.japwor.2013.03.001

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