Estimating a DSGE Model for Japan: Evaluating and Modifying a CEE/SW/LOWW Model

Tomohiro Sugo and Kozo Ueda

No 07-E-2, Bank of Japan Working Paper Series from Bank of Japan

Abstract: We estimate a medium-scale DSGE model of the Japanese economy following Christiano, Eichenbaum and Evans (2005), Smets and Wouters (2003) and Levin et al. (2005). By using actual capital utilization data and modifying the formulation of utilization following Greenwood, Hercowitz and Huffmann (1988), this paper succeeds in incorporating a negative correlation between capital utilization and rental costs to explain actual capital utilization rates. We find hump-shaped and persistent behavior of inflation rates in response to a monetary policy shock, which CEE cast doubt upon.

Keywords: DSGE model; monetary policy; capital utilization; Japan (search for similar items in EconPapers)
JEL-codes: E22 E32 E52 (search for similar items in EconPapers)
Date: 2007-02
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Citations: View citations in EconPapers (7)

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