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Causes of the Long Stagnation of Japan During the 1990s: Financial or Real?

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  • Taizo Motonishi
  • Hirshi Yoshikawa

Abstract

Corporate investment is the most important factor to explain the long stagnation of Japan during the 1990's. Using the Bank of Japan diffusion indices of real profitability' and banks' willingness to lend', we estimate investment functions for four groups of firms: large/small and manufacturing/non-manufacturing. Our results suggest that for large firms, financing constraints are not significant whereas the converse is true for small firms. A fall of investment during 1992-94 is largely explained by real factors. However, the credit crunch occurred beginning 1997 and it lowered the growth rate of GDP by 1.6%.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7351.

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Date of creation: Sep 1999
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Publication status: published as Motonishi, Taizo and Hiroshi Yoshikawa. "Causes Of The Long Stagnation Of Japan During The 1990s: Financial Or Real?," Journal of the Japanese and International Economies, 1999, v13(3,Sep), 181-200.
Handle: RePEc:nbr:nberwo:7351

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  1. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(1), pages 33-60, February.
  2. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  3. Gibson, Michael S, 1995. "Can Bank Health Affect Investment? Evidence from Japan," The Journal of Business, University of Chicago Press, vol. 68(3), pages 281-308, July.
  4. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(1), pages 169-215, February.
  5. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  6. Stephen D. Oliner & Glenn D. Rudebusch, 1994. "Is there a broad credit channel for monetary policy?," Working Paper Series / Economic Activity Section 146, Board of Governors of the Federal Reserve System (U.S.).
  7. Nobuhiro Kiyotaki & Kenneth D. West, 1996. "Business Fixed Investment and the Recent Business Cycle in Japan," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 277-344 National Bureau of Economic Research, Inc.
  8. Ueda, Kazuo & Yoshikawa, Hiroshi, 1986. "Financial Volatility and the q Theory of Investment," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 53(29), pages 11-27, February.
  9. Hiroshi Yoshikawa, 1993. "Monetary Policy and the Real Economy in Japan," NBER Chapters, in: Japanese Monetary Policy, pages 121-159 National Bureau of Economic Research, Inc.
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