A0313
Title: Estimating medium-scale new Keynesian model under the zero lower bound for Japan
Authors: Hirokuni Iiboshi - Nihon University (Japan) [presenting]
Abstract: The Japanese economy has been caught in a liquidity trap where the nominal interest rate is on the zero lower bound (ZLB) since the late 1990s and has experienced prolonged deflation and stagnation. The impact of the ZLB on deflation and stagnation in Japan is examined by estimating a medium-scale New Keynesian model with the ZLB. To this end, OccBin and inversion filter are incorporated into the SMC with model tempering proposed by a recent study and efficient Bayesian inference of the model from 1980 to 2016, before the negative interest rate policy. From these estimates, estimates of structural shocks are calculated as historical decompositions and impulse response functions. In addition, by computing counterfactuals that do not impose the ZLB constraint, the extent to which the ZLB constraint contributes to the deterioration of the economy is quantified.
