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Did the Financial Crisis in Japan Affect Household Welfare Seriously?

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  • YASUYUKI SAWADA
  • KAZUMITSU NAWATA
  • MASAKO II
  • MARK J. LEE

Abstract

We investigate whether and how the credit crunch during the financial crisis in Japan affected household welfare. We estimate the consumption Euler equation with endogenous credit constraints using household panel data for 1993–1999, generating several findings. First, a small but non-negligible portion of the households faced credit constraints during the crisis, rejecting the standard consumption Euler equation. Second, the credit crunch affected household welfare negatively, albeit not seriously. The estimated welfare loss ranges between two to ten percent increases in marginal utility, depending on income level. Finally, our results corroborate that the credit crunch in Japan was supply-driven.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 43 (2011)
Issue (Month): (03)
Pages: 297-324

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Handle: RePEc:mcb:jmoncb:v:43:y:2011:i::p:297-324

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. On the cost of financial crises
    by Economic Logician in Economic Logic on 2010-06-02 15:39:00
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Cited by:
  1. Assaf Razin & Steven Rosefielde, 2011. "Currency and Financial Crises of the 1990s and 2000s," CESifo Economic Studies, CESifo, vol. 57(3), pages 499-530, September.

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