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 ...
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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