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Did the Financial Crisis in Japan Affect Household Welfare Seriously?

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Author Info

  • Yasuyuki Sawada

    ()
    (Faculty of Economics, University of Tokyo)

  • Kazumitsu Nawata

    ()
    (Graduate School of Engineering, University of Tokyo)

  • Masako Ii

    ()
    (School of International and Public Policy, Hitotsubashi University)

  • Mark J. Lee

    ()
    (Department of Economics, Towson University)

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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File URL: http://www.towson.edu/cbe/economics/workingpapers/2010-11.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Towson University, Department of Economics in its series Working Papers with number 2010-11.

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Length: 35 pages
Date of creation: Apr 2010
Date of revision: Apr 2010
Handle: RePEc:tow:wpaper:2010-11

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Postal: Towson, Maryland 21252-0001
Phone: 410-704-2959
Fax: 410-704-3424
Web page: http://www.towson.edu/cbe/economics/
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Related research

Keywords: Credit crunch; Consumption Euler equation; Household Welfare.;

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Blog mentions

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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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