2023 Fiscal Year Research-status Report
Business Cycle Accounting with Non-linear Solution Methods
| Project/Area Number |
22K01394
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| Research Institution | Keio University |
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Principal Investigator |
大津 敬介 慶應義塾大学, 商学部(三田), 教授 (50514527)
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| Co-Investigator(Kenkyū-buntansha) |
稲葉 大 専修大学, 経済学部, 教授 (50611315)
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| Project Period (FY) |
2022-04-01 – 2025-03-31
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| Keywords | 景気循環会計 / 非線形解法 / コロナショック |
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| Outline of Annual Research Achievements |
The main aim of this project is to assess the tradeoff between computational efficiency and accuracy across linear and non-linear solution methods. We will analyze the Covid-19 crisis because economic fluctuations are large, which will lead to significant approximation errors in the linear method. We apply the Business Cycle Accounting framework of Chari, Kehoe and McGrattan (2007) because it is a useful method to decomposes economic fluctuations into representative sources. However, it is challenging to solve this model with non-linear methods due to the computational burden. Therefore, this project will provide new insights not only on the sources of the latest economic crisis, but also tradeoff between computational efficiency and accuracy.
In the first year, we reviewed the literature on solution methods to design our Business Cycle Accounting method. In particular, the Co-Investigator reviewed the finite element method and the parameterized expectation algorithm. The Principal Investigator reviewed the machine learning literature on Artificial Neural Networks. We have jointly designed the non-linear solution method for Business Cycle Accounting with Artificial Neural Networks at a conceptual level.
In the second year, we have extended the Business Cycle Accounting method to various settings. The Principal Investigator applied the method to monthly business cycle data to investigate the short run impact of Covid-19 in Japan. The-Co-Investigator implemented the framework to a two-agent model to identify the sources of business cycles and inequality.
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| Current Status of Research Progress |
Current Status of Research Progress
2: Research has progressed on the whole more than it was originally planned.
Reason
We have developed business cycle models and data to be analyzed using the proposed non-linear solution methods. The Co-Investigator has already presented preliminary results in an international conference and published a working paper.
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| Strategy for Future Research Activity |
In the third year, we will focus on comparing business cycle accounting results between linear and non-linear methods. We will organize a workshop to disseminate our findings.
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| Causes of Carryover |
We used our funds in 2023 for travelling to attend international conferences and recieve feedback from specialists. The travelling cost was lower than we initially expected. We will utilized the remaining funds to organize a workshop and attend international conferences in 2024.
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