We estimate a medium-scale DSGE model of the Japanese economy following Christiano, Eichenbaum and Evans (2005), Smets and Wouters (2003) and Levin et al. (2005). By using actual capital utilization data and modifying the formulation of utilization following Greenwood, Hercowitz and Huffmann...

This paper examines how and to what extent parameter estimates can be biased in a dynamic stochastic general equilibrium (DSGE) model that omits the zero lower bound (ZLB) constraint on the nominal interest rate. Our Monte Carlo experiments using a standard sticky-price DSGE model show that no...