The evolution of Japanese real GDP components in the time–frequency domain: The disappearance of the investment accelerator effect?

Abstract

Understanding the interaction between national income GDP expenditure components is a key part of the study of the macroeconomics of any country. The general aim of this study is to explore this interaction between the GDP expenditure components in the time–frequency domain for the country of Japan, obtain some stylized facts and then compare them with those of the United States. The main result shows that the cyclical interactions between consumption and investment are typical of an “accelerator” effect and operate at several different frequencies, but that the several different cycles evident in the data phase out in the 1990s, once secular stagnation started to take hold. We hypothesize that Japan's investment drivers then changed to be dependent on the external sector by the 2000s. A secondary result is that Japanese fiscal policy appears to have been largely ineffective in terms of creating cyclical interactions with other GDP components.