Review of Fluctuations in Land and Stock Prices in the Japanese Economy

This paper attempts to shed light on whether innovations in stock and land prices have contributed to fluctuations in the Japanese economy. From a simple VAR model, the results suggest that land and stock prices are related to movements in real GDP, CPI, and the interest rate. Specifically, we find that shocks to the stock price have more immediate impact on real GDP. Shocks to the land price, which are strongly correlated to the stock market as a risk factor, have significant impacts on CPI even under the zero interest rate commitment. After the bubble burst, both prices were not found to have a significant interaction with interest rate.