Keisuke Otsu

A Neoclassical Analysis of the Asian Crisis: Business Cycle Accounting for a Small Open Economy

This paper applies the business cycle accounting method à la Chari, Kehoe and McGrattan (2007) to a standard neoclassical small open economy model and assesses the economic crises in Hong Kong, Korea and Thailand. Quantitative results show that distortions in production efficiency are important in all countries in accounting for the sudden output collapses while distortions in the investment and international financial markets are not. If domestic or international financial frictions are the main source of the Asian crisis, they must have operated through total factor productivity (TFP).

Business Cycle Accounting of the BRIC Economies

Abstract Drawing upon the experiences of Brazil, Russia, India and China (BRIC), we apply the Business Cycle Accounting methodology to study the phenomenon of rapid economic growth. We document that while efficiency wedges do contribute in a large part to growth, especially in Brazil and Russia, there is an increasing importance of investment wedges especially in the late 2000s, noted in China and India. The results are typically related to the stages of development with Brazil and Russia coming off a recession in the 1990s to grow in the 2000s, while India and China were on a comparatively stable growth path. Our results suggest, at least for the BRICs examined, that while efficiency wedges play a major role in jump-starting recovery, investment wedges are equally important for sustaining the recovery. Relating wedge patterns to institutional and financial reforms, we find that financial market developments and effective governance in BRICs in the last decade are consistent with improvements in investment and efficiency wedges that led to growth.

A Neoclassical Analysis of the Postwar Japanese Economy

Two key features of the postwar Japanese economy are the rapid economic growth during the 1960s and early 70s and the decline in labor supply during the rapid growth period. Taking the capital stock destruction and total factor productivity (TFP) as given, a standard neoclassical optimal growth model can account for the growth patterns of postwar Japanese capital stock, output, consumption, and investment. The decline in labor during the rapid growth period can be attributed to an income effect that occurs as household consumption rises above its subsistence level in this period.

The post-crisis slump in Europe: a business cycle accounting analysis

Abstract This paper analyzes the post-crisis slump in 30 European economies during the 2008Q1–2014Q4 period using the business cycle accounting (BCA) method à la [Chari, V. V., P. Kehoe, and E. McGrattan. 2007. “Business Cycle Accounting.” Econometrica 75 (3): 781–836]. We find that the deterioration in the efficiency wedge is the most important driver of the European Great Recession and that this adverse shock persists throughout our sample. Moreover, we find that countries with higher growth in nonperforming loans feature a smaller decline in efficiency wedges. These findings support the emerging literature on resource misallocation triggered by financial crises.