The equilibrium relationship among money, income, prices, and interest rates: evidence from a threshold cointegration test

The long-run equilibrium relationship among money, income, prices, and interest rates in Japan is investigated by the threshold cointegration test, which allows for asymmetric adjustment, introduced by Enders and Siklos (2001). The threshold cointegration approach provides clear evidence of the cointegration relationship characterized by asymmetric adjustment. By allowing for asymmetric adjustment, results are obtained showing the stability of the money demand function, similar to Lucas (1988), who pointed out that the money demand function is stable if unit income elasticity is imposed. In particular, the estimated results show that the adjustment process toward equilibrium is highly persistent above an appropriately estimated threshold, whereas the adjustment process toward equilibrium quickly converges below it. This finding indicates that deviations from equilibrium resulting from increases in money or decreases in income and prices are highly persistent.

The characteristics of the business cycle in Japan

The present study examines the characteristics of the business cycle in the Japanese economy by using the Hodrick-Prescot filter, concluding that a change in consumption is relatively large and that labour input is ficed in Japan. Fluctuating consumption supports a permanent income hypothesis in Japan. The fixed labour input is thought to reflect the characteritics of the Japanese economy, such as a fixed employment custom like the 'lifetime employment system'. This paper presents a simple-stuctured model of the real business cycle(RBC) and examines its validity by simulation. It may be concluded that even a simple model with a time-separable utitlity function and a fixed capital-labour ratio can reproduce the movement of the Japanese economy.

Money, deficit, and public debt in Japan

本研究では、中央銀行と財政当局を独立した目的関数を持つ主体と考え、公的債務の安定化に関して両者による動学ゲームのもとで導出される均衡戦略を推定した。その結果、1975年から2002年の間、わが国では公的債務の安定化は財政当局によって追及され、金融政策はそれとは別に中央銀行により主体的に行われていた可能性が高い、という結果を得た。すなわち、日本銀行は財政赤字を金融政策によってファイナンスすることはなく、財政当局は公的債務残高が増えるとフローの財政赤字を削減することで対応した。This study estimates the underlying parameters in a dynamic game between the fiscal and monetary authorities over the determination of public debt. These estimates reveal the policymakers\u27 attitudes toward the goal of stabilizing the time path of public debt. The central finding is that, in Japan, during the 1975–2002 period, this goal was pursued by the fiscal authority but not by the central bank. Monetary policy did not monetize the stock of public debt outstanding, whereas cyclically adjusted fiscal deficits were reduced to offset increases in the stock of debt in circulation.論説(Article