Overview
The Economic and Social Research Institute published "Economic Analysis No. 210 (Special Planning Issue) - Feature: Future Prospects Using New Long-term Projection Models" in July 2025, a collection of papers on the development and application of new models for analyzing ultra-long-term future prospects of the Japanese economy.
This issue features the results of new model development that enables ultra-long-term economic analysis, moving from conventional short- and medium-term analysis-focused models to address long-term challenges facing the Japanese economy including population decline, technological innovation, and climate change.
Kazuhiro Teramoto's paper "Medium to Long-term Economic Analysis with DSGE Models" provides detailed description of the development of new quantitative DSGE models with endogenized technological growth. This groundbreaking model explicitly considers the impact of R&D investment and human capital accumulation on technological progress, also incorporating demographic dynamics and changes in labor force participation rates.
Key features of the model include:
- Endogenous technological progress driven by R&D investment and human capital
- Explicit modeling of demographic transitions and labor market dynamics
- Integration of innovation processes with macroeconomic variables
- Capability to analyze ultra-long-term economic scenarios
The analysis shows that while R&D efficiency improvements may cause short-term production deceleration, they bring sustainable economic growth in the long term. The model demonstrates how investments in research and development, education, and training contribute to long-term productivity gains, providing valuable insights for policy makers designing growth strategies under demographic constraints.
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The Economic and Social Research Institute published "Economic Analysis No. 210 (Special Planning Issue) - Feature: Future Prospects Using New Long-term Projection Models" in July 2025, a collection of papers on the development and application of new models for analyzing ultra-long-term future prospects of the Japanese economy.
This issue features the results of new model development that enables ultra-long-term economic analysis, moving from conventional short- and medium-term analysis-focused models to address long-term challenges facing the Japanese economy including population decline, technological innovation, and climate change.
Kazuhiro Teramoto's paper "Medium to Long-term Economic Analysis with DSGE Models" provides detailed description of the development of new quantitative DSGE models with endogenized technological growth. This groundbreaking model explicitly considers the impact of R&D investment and human capital accumulation on technological progress, also incorporating demographic dynamics and changes in labor force participation rates.
Key features of the model include:
- Endogenous technological progress driven by R&D investment and human capital
- Explicit modeling of demographic transitions and labor market dynamics
- Integration of innovation processes with macroeconomic variables
- Capability to analyze ultra-long-term economic scenarios
The analysis shows that while R&D efficiency improvements may cause short-term production deceleration, they bring sustainable economic growth in the long term. The model demonstrates how investments in research and development, education, and training contribute to long-term productivity gains, providing valuable insights for policy makers designing growth strategies under demographic constraints.