Many developed countries, including Japan, the EU and the USA, have recently been suffering secular stagnation. In order to recover their economies they have adopted typical policies, such as fiscal and monetary expansions and supply-side reforms. However, GDPs have not responded to those policies, as much as initially expected.
In the literature such macroeconomic downturns are regarded as either declines in productivity or short-run recessions that arise during the price adjustment process. While those approaches are useful to analyze each relevant situation, however, they may not fit the case of secular stagnation such as Japan’s. In fact, it may be difficult to accept the view that the price adjustment process takes more than two decades or that in the early 1990s Japan’s productivity suddenly stopped increasing and since then has never improved.
In this project we incorporate various findings of behavioral economics, e.g. status preference, wealth preference and hyperbolic time discounting, into a dynamic macroeconomic model and explore the mechanism of long-run stagnation. Moreover, we test the validity of various behavioral-economic hypotheses that will yield secular stagnation using economic experiments, surveys and econometric methods. Various policy options and institutional reforms necessary to an economy that suffers secular stagnation are also explored.
- July 1, 2015
Institute of Social and Economic Research
Osaka University, Osaka University
6-1 Mihogaoka, Ibaraki, Osaka 567-0047, JAPAN
TEL: 81-6-6879-8552 FAX: 81-6-6879-8583