To analyze business fixed investment in Japan, which has been unusually volatile in recent years, we develop and apply a loglinear flexible accelerator model. We find that movements in business fixed investment are consistent with movements in output and the tax-adjusted cost of capital, both on...

We explore the link between an interest rate rule for monetary policy and the behavior of the real exchange rate. The interest rate rule, in conjunction with some standard assumptions, implies that the deviation of the real exchange rate from its steady state depends on the present value of a...