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Title: Japan's Lost Decade: Does Money have a Role?

Author(s): Fabio Canova and Tobias Menz

Publication Date: December 2009

Keyword(s): deflation, Japan's Lost decade, money and structural model

Programme Area(s): International Macroeconomics

Abstract: We study the contribution of the stock of money to the macroeconomic outcomes of the 1990s in Japan using a small scale structural model. Likelihood-based estimates of the parameters are provided and time stabilities of the structural relationships analyzed. Real balances are statistically important for output and inflation fluctuations and their role has changed over time. Models which give money no role give a distorted representation of the sources of cyclical fluctuations. The severe stagnation and the long deflation are driven by different causes.

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Bibliographic Reference

Canova, F and Menz, T. 2009. 'Japan's Lost Decade: Does Money have a Role?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7608