External shocks and Japanese business cycles: Evidence from a sign-restricted VAR model

Hiroshi Morita

Japan and the World Economy, 2014, vol. 30, issue C, 59-74

Abstract: This study investigates the sources of Japanese business fluctuations since the 1990s, taking into account both external shocks (e.g., risk premium and foreign demand shocks) and domestic supply and demand shocks. We use the sign-restricted VAR model based on the theoretical model to identify these shocks. The presented results show that approximately 30–50% of the forecast error variances in output can be explained by external shocks. Further, we demonstrate that supply shock is the main influencing factor in Japanese business fluctuations throughout the sample period and that the role of external shocks has been growing in the post-Lehman period, including the effect of the Great East Japan Earthquake.

Keywords: External shock; DSGE model; Sign-restricted VAR (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
Date: 2014
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:30:y:2014:i:c:p:59-74

DOI: 10.1016/j.japwor.2014.02.005

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