Economic Activity, Trade, and Industry in the U.S.–Japan-World Economy: A Macro Model Study of Economic Interactions

This study aims to quantify the relationships between the economies of the United States and Japan on an industrially disaggregated basis. It links two large-scale econometric models of the US and Japan in the framework of the world model system (Project LINK). These models are useful not only for forecasts and aggregate policy studies, but also for detailed investigation of industrial changes and trade policy on sectoral output employment, trade balance and inflation in both countries. The interactions with other parts of the world are also taken into account. Applications to policy changes and exchange rate variations illustrate the potential of the model system and provide a powerful insight into the operation of two closely integrated economies.