Development of a Regional DSGE Model in Japan: Empirical Evidence of Economic Stagnation in the Kansai Economy

Using a dynamic stochastic general equilibrium model, this study empirically examines Japan’s Kansai Region to ascertain causes of its long-run economic stagnation. Simulations and the empirical investigation demonstrate that stagnant private residential and equipment investments and productivity persistency are structural problems responsible for Kansai’s unique economic fluctuations.