Policy Research Domains (Major Policy Research Domains) I. Maintaining Economic Dynamism under the Adverse Demographic Conditions of Low Fertility and Aging Population

Building a New Macroeconomic Model: Focusing on the Financial System

Project Leader/Sub-Leader


KOBAYASHI Keiichiro Senior Fellow




In order to analyze the macroeconomic policy issues facing the Japanese economy it is essential to build a more policy-relevant macroeconomic model. The macro model currently in widespread use in academia is an approach to explain actual data from assumptions about sticky prices and habit formation in consumption. In our research we focus on addressing financial issues such as borrowing constraints on working capital financing (using land as collateral), in building a theoretical model to explain macroeconomic data. In addition, we analyze the relationship between changes in banks' equity capital and the productivity of the economy as a whole from both a theoretical and an empirical perspective. We also analyze themes derived from these themes (e.g. characteristics of medium to long-term economic fluctuations, the Ramsey tax problem in the event of hypothetical crises such as wars). The analytical method is primarily theoretical research, and whenever necessary we adopt such methods as (1) the building of theoretical models, (2) the use of data to conduct empirical research, and (3) case studies by such means as literature searches.

Until June 30, 2007

Major Research Results


RIETI Discussion Papers