The Role of Central Bank in the Recession in the Case of Japan's Recession

Shigeyoshi Miyagawa, Yoji Morita and Yoshitaka Sawada
Additional contact information
Shigeyoshi Miyagawa: Department of Economics, Kyoto Gakuen University, Kyoto, Japan
Yoji Morita: Department of Economics, Kyoto Gakuen University, Kyoto, Japan
Yoshitaka Sawada: Department of Commerce, Kwansei Gakuin University, Kobe, Japan

No 17, Discussion Papers from Aboa Centre for Economics

Abstract: Japan's economy is expanding and expected to continue expanding moderately, according to Monthly Report of Recent Economic and Financial Developments released by the Bank of Japan in July 2007.The BOJ declared the change of policy stance at the Monetary Policy Meeting held on July 14, 2006. The BOJ had to tackle a recession which the Japanese economy had not experienced before. The economy was on the verge of financial panic, especially in 1997 and 1998, when major financial institutions had failed. It reminded us of the recurrence of the Great Depression in the 1930s. The article will clarify how the Japanese economy fell into a serious depression with a reflection on the role of the BOJ in the emergence of prolonged depression. We will also estimate the interest rate elasticity of money demand in order to identify whether or not the Japanese economy was in a liquidity trap in the prolonged recession. We will use the EGARCH model to quantify the financial anxieties. The conclusion will suggest that the BOJ should have paid more attention to the behavior of money stock at the early stage of depression.

Keywords: bubble; money stock; financial anxieties; liquidity trap (search for similar items in EconPapers)
JEL-codes: E21 E22 E24 E44 (search for similar items in EconPapers)
Pages: 32
Date: 2007-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ace-economics.fi/kuvat/dp017.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tkk:dpaper:dp17

Access Statistics for this paper

More papers in Discussion Papers from Aboa Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by Susmita Baulia ().