This paper proposes and estimates an extended shadow-rate term structure model, and uses it to extract inflation risk premia from nominal and real term structures. Our model incorporates the shadow rate and thereby explicitly takes account of the zero lower bound constraint of nominal interest...

We present an empirical analysis on the New Keynesian Wage Phillips Curve (NKWPC) as derived by Gali (2011) using data for Japan and the US. NKWPC provides some theoretical insights on the relationship between wage inflation and the unemployment rate. We find that the empirical performance of...

We define downward price rigidity as the state in which the speed at which prices fall is slower than that in which they rise. Based on this definition, we examine the downward price rigidity of each item that constitutes the core CPI of Japan. That is, according to the results of fractional...

This paper examines whether search and matching frictions in labor markets can account for cross-country differences in business cycle properties. The particular interest is the joint effect of two institutional variables, employment protection and the replacement income of unemployed workers. I...

Japan has suffered from long-lasting but mild deflation since the latter half of the 1990s. Estimates of a standard Phillips curve indicate that a decline in inflation expectations, the negative output gap, and other factors such as a decline in import prices and a higher exchange rate, all...

Recent empirical literature suggests that the degree of nominal rigidities varies over monetary policy regimes. This implies that monetary policy analysis with exogenously given nominal rigidities is subject to the Lucas critique. In a Calvo-style sticky price model, we endogenize nominal...

This paper quantitatively evaluates a steady-state inflation rate that is considered desirable from the perspective of social welfare, using a model describing the Japanese economy. Specifically, it begins by setting out points concerning the costs and benefits that accompany inflation. We build...

This paper explains the weak 'Phillips correlation' under low trend inflation.This correlation is confirmed empirically but the standard sticky price models fail to account for it. This paper extends the standard sticky price model to the case of the "smoothed off kinked" demand curve, which is...

This paper shows that changes in international competitiveness played a significant role in creating the deflationary pressure in Japan from 1980 to 2001. Applying Blanchard and Quah's (1989) SVAR technique to Dornbusch, Fischer, and Samuelson's (1977) classical comparative advantage model, we...

Using a model of island economy where financial markets aggregate dispersed information of the public, we analyze how two-way communication between the central bank and the public affects inflation dynamics. When inflation target is observable and credible to the public, markets provide the bank...