RIEB Discussion Paper Series No.2022-32

RIEB Discussion Paper Series No.2022-32


Cyclical Activity and Inflation under Secular Stagnation: Empirical Evidence Using Data on Japan's Lost Decades


This paper disputes the suspicions about the existence and stability of the trade-off between nominal inflation and the real economy when missing deflation and reinflation under secular stagnation by providing empirical evidence of the stability of this short-run trade-off. To this end, we construct a simple measure of demand-pull pressures, namely the cyclical activity index, using time-series data for a period that includes Japan's secular stagnation. We then quantitatively examine the relationship between inflation and the measured cyclical activity. The empirical results support that the cyclical activity index has a stable and economically meaningful relationship with short-term inflation.


Inflation; Cyclical activity; Phillips curve; Economic slack; Secular stagnation; Japan

JEL Classification

E31, E32


Research Institute for Economics and Business Administration(RIEB)
Center for Computational Social Science (CCSS)
Kobe University
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