An Analysis of the Relation between Macroecnomic Fluctuations and Policy Decision Making
1992 Volume 1992 Issue 19 Pages 45-59
Details
1992 Volume 1992 Issue 19 Pages 45-59
The aims of this paper is to analyze the relation between fluctuations of the macroeconomic variables such as real GNP and price index and policy decison making of fiscal and monetary policy by using Japanese data.
First we make a survey of the recent politico-economic theories and test the fitness of these theories in Japan. The conclusion of this test is that none of the theories fit well in Japan.
Second we test the causality between the fluctuations of macroeconomic variables (real GNP, price index) and the fiscal and monetary policy by using Granger's causality test. The conclusion of this test is that the fluctuations of macroeconomic variables cause the fiscal and monetary policy and that the fiscal and monetary policy cause the fluctuations of macroeconomic variables.
Third we propose a new model to explain Japanese politico-economic structure. This is as follows. We devide fiscal and monetary policy into two parts respectively. The former part is one which is explained by fluctuations of GNP and price. The latter part is one which does not belong to the former one. We can consider that the former part is ascribed to policy makers' office-oriented motivation and that the latter part is ascribed to policy makers' ideology-oriented motivation. By using Japanese data, we actualy make these division and get various characteristics of each parts.
Fourth we test the effect of the unanticipated policy. That is, we test whether Philips curve is vertical. The conclusion of this test is that the effect of the unanticipated policy is effective (Philips curve is not vertical) .
Throughout this paper, we confirm the interaction that the fiscal and monetary policy composed of office-oriented motivation and ideology-oriented motivation cause the fluctuations of the macroeconomic variables such as real GNP and price index regardless how to people anticipate and the fluctuations of the macroeconomic variables change the ratio of the policy motivation.
