Work detail

Dependency between Deflation and Recession in Japan over the Past Two Decades

Author: Bc. Daniel Vopat
Year: 2014 - summer
Leaders: MPhil Pavel Ryska Ph.D.
Work type: Bachelors
Language: Czech
Pages: 53
Awards and prizes:
Abstract: Aim of this bachelor's thesis is to find out if and in what manner has been the real GDP growth
influenced by change of price level in Japan during last twenty years. This period is in Japan
characteristic by economic stagnation often accompanied by deflation. Many economists and politicians
presume that deflation keeps Japanese economy from growing again and they consider deflation to be an
undesirable element that needs to be prevented. We use methods of econometric analysis to achieve our
goal. To be more specific we use ordinary least squares estimation on quarterly data. The model is
estimated in two ways to prevent possible influence of world economic crisis in 2008 and 2009. First
model takes into account all collected data and second model drops out data from world economic crisis
period. According to the first mentioned model analysis, the fourth lag of price level is negatively
correlated with real GDP growth on 5 % significance level. To put it in another way, deflation was
followed by acceleration of quarterly real GDP growth. This correlation was insignificant in the second
model. Our research indicates that there is no reason to consider deflation being the cause of long lasting
economic stagnation


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