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Non-performing loans, prospective bailouts, and Japan's slowdown

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  • Barseghyan, Levon

Abstract

The delay in the government bailout of the financial sector played a key role in Japan's slowdown during the 1990s and early 2000s. This argument is articulated in a general equilibrium model in which the government provides deposit insurance to the financial sector. The existence of non-performing loans, combined with a delay in the bailout, leads to a persistent decline in economic activity. Consistent with Japan's experience, the decline in output is caused not only by a fall in investment, but also by a decline in labor and total factor productivity.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 7 (October)
Pages: 873-890

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Handle: RePEc:eee:moneco:v:57:y:2010:i:7:p:873-890

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Web page: http://www.elsevier.com/locate/inca/505566

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Cited by:
  1. Robert Dekle & Kenneth Kletzer, 2004. "Deposit Insurance, Regulatory Forbearance and Economic Growth: Implications for the Japanese Banking Crisis," CESifo Working Paper Series 1136, CESifo Group Munich.
  2. Keiichiro Kobayashi, 2003. "Deflation Caused by Bank Insolvency," Discussion papers 03022, Research Institute of Economy, Trade and Industry (RIETI).
  3. Swamy, Vighneswara, 2013. "Determinants of Bank Asset Quality and Profitability - An Empirical Assessment," MPRA Paper 47513, University Library of Munich, Germany.
  4. Swamy, Vighneswara, 2012. "Impact of Macroeconomic and Endogenous Factors on Non-Performing Bank Assets," MPRA Paper 47517, University Library of Munich, Germany.
  5. Dekle, Robert & Kletzer, Kenneth, 2003. "The Japanese banking crisis and economic growth: Theoretical and empirical implications of deposit guarantees and weak financial regulation," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 305-335, September.
  6. Chakraborty, Suparna, 2006. "Amplifying Business Cycles through Credit Constraints," MPRA Paper 1808, University Library of Munich, Germany.
  7. Ricardo Bebczuk & Máximo Sangiácomo, 2008. "The Determinants of Non-Performing Loan Portfolio in the Argentine Banking System," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(51), pages 83-121, April - S.
  8. Agnese, Pablo & Sala, Hector, 2009. "The fading 1990s in Japan: Driving forces behind the unemployment upsurge," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 428-439, June.
  9. Hajime Tomura, 2007. "Firms Dynamics, Bankruptcy Laws and Total Factor Productivity," Working Papers 07-17, Bank of Canada.
  10. Vasiliki Makri & Konstantinos Papadatos, 2014. "How accounting information and macroeconomic environment determine credit risk? Evidence from Greece," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 7(1), pages 129-143, April.
  11. Katsuya Takii, 2004. "Entrepreneurial Efficiency," Macroeconomics 0406007, EconWPA.
  12. Ricardo Bebczuk & Máximo Sangiácomo, 2007. "Determinants of the Non-Performing Loans Portfolio in Argentine Banks," BCRA Working Paper Series 200716, Central Bank of Argentina, Economic Research Department.
  13. Morten Bech & Leonardo Gambacorta, 2012. "Monetary policy in a downturn: Are financial crises special?," BIS Working Papers 388, Bank for International Settlements.
  14. Robert Dekle & Kenneth Kletzer, 2004. "Deposit insurance, regulatory forbearance and economic growth: implications for the Japanese banking crisis," Working Paper Series 2004-26, Federal Reserve Bank of San Francisco.

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