The Morning After: Explaining the Slowdown in Japanese Growth in the 1990's

Author/Editor:

Tamim Bayoumi

Publication Date:

January 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses vector autoregressions (VARs) to investigate four explanations of the extended slump in Japanese economic activity during the 1990s: the absence of bold and consistent fiscal stimulus; limited room for expansionary monetary policy because of a liquidity trap; asset price deflation reflecting the long-term problems caused by overinvestment, inadequate returns on saving, and debt overhang; and disruption of financial intermediation. The results indicate that disruption in financial intermediation, largely operating through the impact of changes in domestic asset prices on bank lending, has been the principal case of the slump.

Series:

Working Paper No. 1999/013

Subject:

Asset prices Bank credit Expenditure Financial services Land prices Money Prices Real interest rates

English

Publication Date:

January 1, 1999

ISBN/ISSN:

9781451842982/1018-5941

Stock No:

WPIEA0131999

Pages:

37

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