JFR-rg: A New Macroeconomic Framework for High-Debt, Low-Growth Economies under Financial Repression

Battle Count: 50

The paper is primarily a macroeconomic policy and debt sustainability framework, not a quantitative trading paper. However, it has indirect relevance for: (1) JGB yield curve trading strategies through the r-g spread dynamics and Normalization Trap analysis; (2) yen FX trading through the nonlinear exchange rate channel and stability window (140-155 JPY/USD); (3) sovereign risk assessment for fixed-income portfolio management; (4) understanding the mechanical IOER arithmetic that affects short-term rate expectations; (5) the φt monitoring as a leading indicator for JGB market stress. The framework's emphasis on observable FRED data and real-time monitoring makes it operationally relevant for macro-driven trading strategies, but it does not provide direct trading signals, alpha generation, or portfolio optimization algorithms.

The core accounting identity (Layer L1) is straightforward: bt = bt-1(1 + rn_t - gn_t) + dt. The Debt Sustainability Corridor is a simple linear boundary in (εt, g*n_t) space. However, the full framework requires: (1) constructing εt from FRED data; (2) estimating φt from BoJ Flow of Funds; (3) calibrating the nonlinear exchange rate equation with parameters α, β, ē; (4) running Local Projections, VAR, ARDL, Chow tests, and LSTAR estimations; (5) conducting multi-scenario counterfactual simulations with IOER arithmetic; (6) performing sensitivity analyses across parameter grids. The empirical Layer L2 requires econometric expertise in time series methods. The theoretical contributions (Ratchet, Corridor) are analytically tractable but require careful interpretation of scope conditions.

All empirical series are drawn from the publicly available FRED database (Federal Reserve Bank of St. Louis, March 2026 snapshot). Specific FRED series identifiers are provided (JPNNGDP, JPNRGDPEXP, DEXJPUS, JPNCPIALLMINMEI, IRLTLT01JPM156N, IRSTCI01JPM156N, GGGDTAJPA188N, LRHUTTTTJPM156S). Replication code is stated as available from the author upon request. Calibration parameters are fully documented with sensitivity analyses in Appendix E. However, some parameters (ē, β) are not identified from the sample, and the φt data comes from BoJ Flow of Funds accounts which require separate access. The paper acknowledges LLM-assisted drafting.