S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics (SJE) Seoul Journal of Economics vol.20(1) (Spring 2007)
Investment Specific Technological Changes in Japan
- Issue Date
- Seoul Journal of Economics, Vol.20 No.1, pp. 165-200
- This paper studies the role of investment specific technological
changes in economic fluctuations in Japan. Following Greenwood,
Hercowitz, and Huffman (1998) and Fisher (2006), we model a
consumption goods producing sector and an investment goods
producing sector, and consider technological changes that are
common to the two sectors as well as one that is specific to the
latter sector. We evaluate each shock's role using two approaches.
In the first approach, we extend the model of Hayashi and Prescott
(2002) by incorporating investment specific technological changes.
This model is calibrated to the Japanese economy. In the second
approach, we estimate an SVAR model with sign restrictions (Uhlig
2005) in which the restrictions are derived from implications that
are common to competing major dynamic general equilibrium
models incorporating investment specific technology shocks. The
first exercise suggests that investment specific technological
improvements sustained the potential growth rate of the Japanese
economy in its lost decade. The second exercise shows that
investment specific technology shocks are at least as important as
neutral technology shocks in Japans business cycles.