Japan's Stagnant Nineties: A Vector Autoregression Retrospective

Christel Rendu and Ramana Ramaswamy

No 1999/045, IMF Working Papers from International Monetary Fund

Abstract: This paper uses a vector autoregression (VAR) approach to identify the driving forces of the growth slowdown in Japan during the 1990s. Negative shocks to both residential and nonresidential investment are shown to have been important determinants of the slowdown. Despite the collapse in asset prices, negative shocks to private consumption were relatively small. A surprising conclusion is that trends in public consumption had a dampening impact on activity in the 1990s. The VAR estimations do not support the counterfactual conjecture that activity in Japan would have been significantly weaker in the absence of the expansionary shift in fiscal policy.

Keywords: WP; consumption; Japan; monetary policy; price; vector autoregression; shocks; bubble; expansionary monetary policy; VAR estimation; fiscal policy variable; stage VAR; investment project; VAR approach; contractionary monetary policy; credit-crunch viewpoint; VAR model; Private consumption; Public investment spending; Private investment (search for similar items in EconPapers)
Pages: 22
Date: 1999-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1999/045

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