Qian, Shenglin, authorVasudevan, Ramaa, advisorKoontz, Stephen R., committee memberBraunstein, Elissa, committee member2023-02-022023-02-022009https://hdl.handle.net/10217/236192Covers not scanned.Print version deaccessioned 2023.Japan has run a large trade surplus with the U.S. and has financed the U.S. deficit for a long time, so the adjustment mechanism of financial flows between the U.S. and Japan is an important issue. In this paper, in order to investigate the capital flow between Japan and the U.S, I build a VAR model to study the fluctuations of interest rate spread between the U.S. and Japan and international reserve of Japan. The analysis of the Impulse Response Function suggests that the dynamic response to an event, such as the rise of the deficit of the U.S. is such that movements in the international reserve of Japan and the interest rate spread tend to restore equilibrium. To support my conclusion, I use the subset of the sample data to simulate and forecast the real event. The work shows that the model can accurately explain the adjustment process.masters thesesengCopyright and other restrictions may apply. User is responsible for compliance with all applicable laws. For information about copyright law, please see https://libguides.colostate.edu/copyright.Foreign exchange rates -- Japan -- Mathematical modelsForeign exchange rates -- United States -- Mathematical modelsDeficit financing -- United StatesText