This paper shows that changes in international competitiveness played a significant role in creating the deflationary pressure in Japan from 1980 to 2001. Applying Blanchard and Quah's (1989) SVAR technique to Dornbusch, Fischer, and Samuelson's (1977) classical comparative advantage model, we...

To analyze the relative price of nontradable to tradable goods, we build a two-country, two-sector dynamic open macro model that in based on consumers' intertemporal optimizing behavior. The model predicts that the relative price of nontradable goods depends on the cross-sectoral productivity...