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Research Areas & Themes ( 2011 ): Economics

Macroeconomic theoretical research

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During 2009-2010, we examined various techniques for macroeconomic models that incorporated the banking sector and confirmed promising directions. Beginning in 2011, we will narrow down those directions, and work to elaborate on and deepen models. Through development of the models, we will deepen our relationship with business cycle research and monetary policy research. We will continue striving to deepen work on existing research themes such as models that incorporate monetary constraints into business cycle accounting research and the New Keynesian Model. Over the medium term, we will use international macroeconomics frameworks to address research that comprehensively analyzes mutual associations among the three elements exchange rates, price behavior, and fiscal soundness.
As part of these research activities, we will network with macroeconomists in Japan and abroad, attend outside conferences and seminars, and hold conferences at CIGS.

Elucidation of the home price fluctuation mechanism and construction of a home price index

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1) Research on changes in the cross-sectional distribution of home prices
We will continue the research on changes in the distribution of home prices over time that we began in 2010. Research during 2011 will focus on differences in home price distribution during and outside bubbles.

2) Construction of a home price index that accounts for the time it takes until a sale is made
After the bubble in Japanese home prices burst, prices slowly declined for over 10 years. This was a factor in slowing the resolution of banks' bad loans and excessive corporate debt. Since the collapse of the bubble in the USA, a slow fall, the same trend as in Japan, has been seen. This research will examine why home prices fall slowly. Our hypothesis is that sellers dislike finalizing losses and thus set their asking prices high. This means that it takes a long time to sell homes. Eventually, however, buyers are found and thus the homes appear in data to have sold at fairly high prices. In other words, the market price for homes cannot be grasped merely by looking at agreed prices. It is also necessary to incorporate the time it takes until homes sell. In this research, we will obtain and analyze data on changes in home prices (data that records changes in asking prices from the first seller listing to the conclusion of a contract) from Recruit Co. and the Real Estate Information Network (REINS) for East Japan. The final result of our analysis will be the designing of a home price index that incorporates the amount of time it takes to sell homes. It will be presented to the Ministry of Land, Infrastructure and Transport's study group on improving the indexes for trends in real estate prices (of which Watanabe is a member). In addition, it will be presented at international conferences of real estate experts.

3) Comparative analysis of various home price databases
There are three types of raw data on home prices in Japan. They are 1) registry data (using registries to grasp when transactions have been made and surveying buyers about the price), 2) REINS data (an information exchange system for real estate marketers), and 3) Recruit data (property prices indicated on the Recruit Co. website). These datasets differ in terms of points such as the extent of the transactions they cover, the accuracy of the transaction prices they record, how accurately transaction timing is recorded, and how quickly transaction information is reflected. In this research, we will match properties included in all three datasets in order to clarify the characteristics of each dataset. Our research results will be reported to the Ministry of Land, Infrastructure and Transport's study group on improving the indexes for trends in real estate prices. They will be used as a resource for determining which datasets should be used when compiling a home price index. The results will be reported at an international conference in The Hague in spring 2011 (Workshop on Residential Property Price Indices, organized by Statistics Netherlands).

Elucidation of the mechanism of fluctuation in consumer goods prices

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1) Analysis of strategic complements in the setting of prices for consumer goods in internet markets
In our 2010 research on price setting in the Kakaku.com marketplace, we found that sellers mimic each other's behavior. (When other sellers change prices, a given seller will too. When others do not change prices, a given seller will not. The results are to be published in an article in the Scandinavian Journal of Economics.) Based on these results, during 2011 we will analyze why sellers mimic their competitors and the nature of the mechanism that leads them to switch from mimicking not changing prices to mimicking price changes.

2) Research on the fairness of price setting in internet auction markets
Do sellers raise the price of umbrellas when it starts raining? According to the theory of fairness, consumers believe that raising prices in response to random events such as changes in the whether is not fair, so sellers will not raise prices. In this research, we will test the validity of this hypothesis. We will analyze changes in the price of facemasks in internet auctions during the 2009 influenza epidemic.

3) Research on price stickiness using POS data
We will explore the causes of price stickiness by examining how price stickiness changes when the aggregation stage and method for POS data are changed.

Research on the influence of news on asset prices

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Using all news since 2003 obtained from Thomson Reuters (in about 20 languages), we will analyze the influence of news on individual prices. We will also analyze "news trade," the ways in which news spreads between countries.

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