Economic Analysis Series No.172
THE ECONOMIC ANALYSIS

March, 2004
"Social Marginal Cost of Public Funds: The Case of Progressive Personal Income Taxes in Japan."
Masayoshi HAYASHI
Shunichiro BESSHO
"Exchange Rate as Monetary Policy Channel"
Akira TERAI
Yasuyuki IIDA
Koichi HAMADA
"What Changes Deflationary Expectations? Evidence from Japanese Household-level Data"
Satoshi SHIMIZUTANI
Masahiro HORI
"Why has R&D Productivity of the Japanese Firms declined?"
Kiyonori SAKAKIBARA
Masaharu TSUJIMOTO
"The CAO Short-Run Macroeconometric Model of Japanese Economy (2003 version) -Basic Structure, Multipliers, and Economic Policy Analysis-"
Masahiro HORI
Daiju AOKI

The full text is written in Japanese.

(Abstract)

"Social Marginal Cost of Public Funds: The Case of Progressive Personal Income Taxes in Japan."

This paper, taking an explicit account of the progressive tax system, calculates the social marginal cost of public funds (SMCF) for the Japanese economy. First, we calculate the SMCF for the three types of progressivity preserving tax increases. Second, we also calculate the SMCF for a single bracket tax rate change and compare the estimates among the brackets. Third, we apply the inverse optimum problem by Ahmad and Stern (1984) to the progressive tax system in Japan.

"Exchange Rate as Monetary Policy Channel"

In this paper, we focus on a monetary approach to exchange rate. We analyzed the factors determining the exchange rate by time series model. We obtained the following results. The monetary base and expected inflation rate have a significant effect on exchange rates. However, sterilized intervention and the intervention index compiled by "Foreign Exchange Intervention Operations" have no significant effect on exchange rates.

"What Changes Deflationary Expectations? Evidence from Japanese Household-level Data"

This paper utilizes a unique Japanese household-level data to estimate average price expectations, to examine what changes price expectations, and to look at how changes in price expectations affect household consumption.

Our empirical results indicate that price expectations range from minus 0.5 to zero percent for the period from 2001 to 2003 in Japan. Price expectations depend on lagged expectations and current price movements. Monetary policy announcements did not largely change price expectations, since a series of quantitative easing caused revision of price expectations only for small portion of people surveyed.

"Why has R&D Productivity of the Japanese Firms declined?"

What do Japanese firms achieve by R&D investment? The paper deals with this by reviewing the previous research on the relationship between R&D investment and company performance. The available observations are not decisive, but they suggest that relative R&D performance has declined.

The paper also discusses the factors affecting it. As one of the recent characteristics of technology strategy of Japanese firms, there is some evidence of greater reliance on internal R&D since mid 1980s. If true, it probably did hurt to R&D performance.

"The CAO Short-Run Macroeconometric Model of Japanese Economy (2003 version) -Basic Structure, Multipliers, and Economic Policy Analysis-"

This paper describes the basic structure and multipliers of the revised version of the CAO Short-Run Macroeconometric Model of the Japanese Economy, which was firstly released in 1998 (Hori et al. [1998]) and tentative version released in 2001 (Hori et.al. [2001]).

The model is basically a demand-oriented, traditional Keynesian-type model with IS-LM-BP framework; however, it adopts recent developments in econometrics, such as co-integration, and error-correction to ensure a long-run equilibrium.
 

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