Estimating a dynamic stochastic general equilibrium model for Japan

Tomohiro Sugo and Kozo Ueda

Journal of the Japanese and International Economies, 2008, vol. 22, issue 4, 476-502

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.

Keywords: DSGE; model; Monetary; policy; Capital; utilization; Japan (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (52)

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