Sources of Output Fluctuations in the Postwar Japanese Economy

Abstract

The objective of this paper is to uncover the sources of output fluctuations in the postwar Japanese economy. This is achieved through the estimation of structural vector autoregression (VAR) models incorporating a variety of variables and identifying assumptions. The estimated models, while qualitatively similar to familiar U.S. counterparts, differ significantly in the nature and impact of macroeconomic shocks. The salient fact which emerges from the analysis is the extent to which Japanese output variability has been due to supplyRside factors. This finding may help to explain the weak response of the contemporary Japanese economy to demand-side stimulus. (E32, E37)