Endogenous business cycle theory and its application to inflation

2018 Fiscal Year Final Research Report

• Project/Area Number: 15K03350
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Economic theory
• Research Institution: The University of Tokyo (2017-2018); Ministry of Finance, Policy Research Institute (2015-2016)
• Principal Investigator: NIREI Makoto 東京大学, 大学院経済学研究科(経済学部), 准教授 (60530079)
• Project Period (FY): 2015-04-01 – 2019-03-31
• Keywords: 景気循環

Outline of Final Research Achievements

In this project, we successfully account for the positive relation between inflation rate and inflation volatility. The relation has been known since Okun (1971), but there has been no widely accepted explanation for the phenomenon. We construct a new model of endogenous aggregate price fluctuations that exhibit the positive association between the level and volatility in inflation. The paper was presented at Hokkaido University, Bank of Japan, and Hitotsubashi University, and accepted for presentation at Society of Economic Dynamics Annual Meeting and Society for the Advancement of Economic Theory. This project also generated a paper on power-law tails of asset price fluctuations. The paper is now under 2nd-round revise-and-resubmit at a major field journal Theoretical Economics. Finally, this project produced several papers that deal with other related topics such as supply chain disruption and intangible capitals in emerging industries.

Free Research Field

マクロ経済学

Academic Significance and Societal Importance of the Research Achievements

本研究は、景気循環の根本要因として理論化が困難だった内生的要因に光を当て、安定化政策の妥当性を基礎付けた。またインフレ率のレベルと振動の関係を新規に説明したことは、最適インフレ率という古い命題に新たな視点を与える政策的意義をもつ。本研究で鍵となる数理は、確率的累積現象がベキ的減衰を示すファットテールをもたらすことであるが、その導入は経済理論の新潮流であり、企業の相互作用から導いたのは本研究の独創である。