In this paper, we first set up a model that incorporates firm dynamics into the Global Economy Model (henceforth, GEM) developed by the IMF Research Department. Then, we show how the economic variables respond to the shocks that shift the production frontier outwards, namely productivity gains...

Focusing on policy-making under uncertainty, we analyze the Bank of Japanfs monetary policy in the early 1990s when the bubble economy collapsed. Conducting stochastic simulations with a large-scale macroeconomic model of the Japanese economy, we find that the BOJfs monetary policy at that time...

Focusing on policymaking under uncertainty, we analyze the monetary policy of the Bank of Japan (BOJ) in the early 1990s, when the bubble economy collapsed. Conducting stochastic simulations with a large- scale macroeconomic model of the Japanese economy, we find that the BOJf s monetary policy...

Reflecting recent economic developments in Japan, there is a growing interest in how monetary policy should be conducted under low inflation and nominal interest rates. Among several proposed solutions, the conventional wisdom seems to be to commit to lower future short-term nominal interest...

Recent empirical findings conclude that the terms of trade improve even after the positive productivity shock hits the economy among advanced economies. Corsetti, Martin, and Pesenti (2007), henceforth CMPs analytically show that a static two-country model with endogenous firm entry can generate...