Sunday, September 15, 2013

Modeling interest rates in Japan

I should have added a piece on the interest rates to this post on the information transfer model of the price level in Japan. Anyway, following this post on modeling the interest rate in the US, we get a fairly good model for Japan (using the estimated data for NGDP):

This uses this measure of the interest rate, but I still haven't found a robust way to choose a particular interest rate to act as the empirical data.

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Also, try to avoid the use of dollar signs as they interfere with my setup of mathjax. I left it set up that way because I think this is funny for an economics blog. You can use € or £ instead.