Did the Financial Crisis in Japan Affect Household Welfare Seriously?
AbstractWe 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 InfoPaper provided by Towson University, Department of Economics in its series Working Papers with number 2010-11.
Length: 35 pages
Date of creation: Apr 2010
Date of revision: Apr 2010
Credit crunch; Consumption Euler equation; Household Welfare.;
Other versions of this item:
- Yasuyuki Sawada & Kazumitsu Nawata & Masako Ii & Mark J. Lee, 2011. "Did the Financial Crisis in Japan Affect Household Welfare Seriously?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 297-324, 03.
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-08 (All new papers)
- NEP-BAN-2010-05-08 (Banking)
- NEP-MIC-2010-05-08 (Microeconomics)
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