Equilibrium indeterminacy and asset price fluctuation in Japan: A Bayesian investigation

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This paper investigates sources of asset price fluctuation in Japan using an estimated financial accelerator model. For explicit treatment of expectational beliefs characterized by sunspots, the model is analyzed over the parameter space where the equilibrium can be indeterminate. We show that indeterminacy arises if the financial accelerator effect is sufficiently large. According to our Bayesian estimation results, Japan's economy was affected by sunspot shocks; however, the contribution of the sunspots to asset price volatility was low. Rather, net worth and cost shocks drove the asset price fluctuation. We find, however, that the sunspots substantially affected capital investment.

元の言語English
ページ(範囲)967-999
ページ数33
ジャーナルJournal of Money, Credit and Banking
40
発行部数5
DOI
出版物ステータスPublished - 2008 8 1
外部発表Yes

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ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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