Policies for reviving the Japanese economy: Small open economy DSGE with indirect inference method

Fang, Yuji 2021. Policies for reviving the Japanese economy: Small open economy DSGE with indirect inference method. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

The Japanese economy has remained stagnant under various policy stimuli in the past three decades. This study is planned to explore monetary and fiscal policy effectiveness in the Dynamic Stochastic General Equilibrium (DSGE) model. The model is built following Le et al. (2016) and extended to a small open economy based on Minford and Meenagh (2020). We use the indirect inference method to test and estimate the model using un-filtered nonstationary data in 1981Q3 to 2019Q2. The findings are concluded into three aspects: 1) The model with estimated parameters describes Japan's economy well; 2) the shocks from monetary and fiscal policy play a significant role in the recession, but fiscal policy performs better than monetary one; 3) The optimal regime is the current monetary policy regime- Taylor rule in standard situation and Quantitative Easing (QE) in Zero Lower Bound (ZLB) constraintstogether with a strong fiscal response. A robust fiscal policy has been the key missing ingredient in Japanese policy.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General)
Uncontrolled Keywords:	DSGE model, Financial frictions, Quantitative Easing, Zero lower bound, Monetary policy, Fiscal backstop
Date of First Compliant Deposit:	1 August 2022
Last Modified:	05 Jan 2024 06:20
URI:	https://orca.cardiff.ac.uk/id/eprint/151579

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