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Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan

Miki Kohara and Charles Horioka ()

No 12330, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use micro data on young married households from the Japanese Panel Survey of Consumers in order to analyze the importance of borrowing constraints in Japan. We find (1) that 8 to 15 percent of young married Japanese households are borrowing-constrained, (2) that household assets and the husband%u2019s educational attainment are the most important determinants of whether or not a household is borrowing-constrained, and (3) that the Euler equation implication is rejected for both the full sample and for the subsample of unconstrained households. These results suggest that the life cycle/permanent income hypothesis does not apply in Japan and that the presence of borrowing constraints is not the main reason why it does not apply.

JEL-codes: D1 D9 E2 G1 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-mac and nep-sea
Note: EFG
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Published as Kohara, Miki & Horioka, Charles Yuji, 2006. "Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan," Japan and the World Economy, Elsevier, vol. 18(4), pages 358-377, December.

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Journal Article: Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan (2006) Downloads
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