Japan's financial crises and lost decades

Naohisa Hirakata, Nao Sudo, Ikuo Takei and Kozo Ueda

Japan and the World Economy, 2016, vol. 40, issue C, 31-46

Abstract: In this paper, we explore the role of financial intermediation malfunction in macroeconomic fluctuations in Japan. To this end we estimate, using Japanese data, a financial accelerator model in which the balance sheet conditions of entrepreneurs in a goods-producing sector and those of a financial intermediary affect macroeconomic activity. We find that shocks to the balance sheets of the two sectors have been quantitatively playing important role in macroeconomic fluctuations by affecting lending rates and aggregate investments. Their impacts are prominent in particular during financial crises. Shocks to the entrepreneurs’ balance sheets have played a key role in lowering investment in the bubble burst during the early 1990s and in the global financial crisis during the late 2000s. Shocks to the financial intermediaries’ balance sheets have persistently lowered investment throughout the 1990s.

Keywords: Japan's lost decade; Banks’ Balance sheet; Financial accelerators (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Japan's Financial Crisis and Lost Decades (2015)
Working Paper: Japan’s financial crises and lost decades (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:40:y:2016:i:c:p:31-46

DOI: 10.1016/j.japwor.2016.07.003

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