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Research Activities

Research Projects

FY 2006/2007 Research Topic: 4-19
Macroeconomic Implications of Imperfect Markets in Developing Countries


The objective of this research project is to draw more realistic policy implications for developing countries by extending macroeconomic models to reflect some of the characteristics of developing economies, such as market imperfections and the heterogeneity of economic agents. The focus of our research will be on economic growth, business cycles, changes in industrial structures, and income distribution.

Since the Lucas Critique, macroeconomic models have been re-constructed based on well-specified microeconomic foundations. The macroeconomic models which have been developed through this process share a characteristic economic-model structure called dynamic general equilibrium (DGE). Many of the DGE models have been developed in order to understand economic events in industrial countries, and have subsequently been used to explain economic events in developing countries. Because of the model's development history, however, it does not sufficiently reflect the actual situations of developing economies. The available models often include extremely simple assumptions concerning actual events. These simplifications are introduced in order to solve the model mathematically. While the simplification is often acceptable for an industrial countries' economic model, the same simplification can cause problems and lead us to wrong conclusions when it is in an economic model for developing countries. Considering these problems, in this research project, the project members will develop DGE models for developing countries and/or conduct numerical analyses based on the improved DGE models in the context of developing countries.


April 2005 - March 2007


Members of the Research Project

KODAMA Masahiro
YUKI Kazuhiro (Associate Professor, Kyoto University)
KAWABATA Koji (Associate Professor, Kobe University)


  • The final results will be submitted to Developing Economies in 2007.