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Causes of the Long Stagnation of Japan during the 1990fs: Financial or Real?

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Author Info
Taizo Motonishi (Nagasaki University)
Hiroshi Yoshikawa (Faculty of Economics, University of Tokyo)

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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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File URL: http://www.e.u-tokyo.ac.jp/cirje/research/dp/99/cf56/contents.htm
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-56.

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Length: 44pages
Date of creation: Aug 1999
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Handle: RePEc:tky:fseres:99cf56

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  1. Ueda, Kazuo & Yoshikawa, Hiroshi, 1986. "Financial Volatility and the q Theory of Investment," Economica, London School of Economics and Political Science, vol. 53(29), pages 11-27, February. [Downloadable!] (restricted)
  2. Stephen D. Oliner & Glenn D. Rudebusch, 1996. "Is there a broad credit channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13. [Downloadable!]
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  3. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March. [Downloadable!] (restricted)
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  4. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Corporate structure, liquidity, and investment: evidence from Japanese industrial groups," Finance and Economics Discussion Series 82, Board of Governors of the Federal Reserve System (U.S.).
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  5. 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. [Downloadable!]
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  6. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
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  1. Matteo Manera & Alessandro Cologni, 2006. "The Asymmetric Effects of Oil Shocks on Output Growth: A Markov-Switching Analysis for the G-7 Countries," Working Papers 2006.29, Fondazione Eni Enrico Mattei. [Downloadable!]
  2. Andolfatto, David, 2003. "Monetary Implications of the Hayashi-Prescott Hypothesis for Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(4), pages 1-20, December. [Downloadable!]
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  3. Masami Imai & Seitaro Takarabe, 2009. "Transmission of Liquidity Shock to Bank Credit: Evidence from the Deposit Insurance Reform in Japan," Wesleyan Economics Working Papers 2009-001, Wesleyan University, Department of Economics. [Downloadable!]
  4. Wako Watanabe, 2004. "Prudential Regulation, the Credit Crunch" and the Ineffectiveness of Monetary Policy: Evidence from Japan," ISER Discussion Paper 0617, Institute of Social and Economic Research, Osaka University. [Downloadable!]
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