Did the Financial Crisis in Japan Affect Household Welfare Seriously?
Yasuyuki Sawada (),
Kazumitsu Nawata (),
Masako Ii () and
Mark Lee ()
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Kazumitsu Nawata: Graduate School of Engineering, University of Tokyo
Masako Ii: School of International and Public Policy, Hitotsubashi University
No 2010-11, Working Papers from Towson University, Department of Economics
We investigate whether and how the credit crunch during the financial crisis in Japan affected household welfare. We estimate the consumption Euler equation with endogenous credit constraints using household panel data for 1993ï¿½1999, generating several findings. First, a small but non-negligible portion of the households faced credit constraints during the crisis, rejecting the standard consumption Euler equation. Second, the credit crunch affected household welfare negatively, albeit not seriously. The estimated welfare loss ranges between two to ten percent increases in marginal utility, depending on income level. Finally, our results corroborate that the credit crunch in Japan was supply-driven.
Keywords: Credit crunch; Consumption Euler equation; Household Welfare. (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mic
Date: 2010-04, Revised 2010-04
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Journal Article: Did the Financial Crisis in Japan Affect Household Welfare Seriously? (2011)
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Persistent link: http://EconPapers.repec.org/RePEc:tow:wpaper:2010-11
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