DP2436 The Morning After: Explaining The Slowdown In Japanese Growth In The 1990s
Author(s): | Tamim Bayoumi |
Publication Date: | April 2000 |
Keyword(s): | Economic Slump, Financial Intermediation |
JEL(s): | E32, E44 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=2436 |
This paper uses a VAR to investigate four possible explanations of the extended slump in Japanese economic activity over the 1990s: the absence of bold and consistent fiscal stimulus; the limited room for expansionary monetary policy due to a liquidity trap; overinvestment and debt overhang; and disruption of financial intermediation. The results indicate that all of these factors played a role, but that the major explanation is disruption in financial intermediation, largely operating through the impact of changes in domestic asset prices on bank lending.