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Credit crunch and its spatial differences in Japan's lost decade: What can we learn from it?

  • Ishikawa, Daisuke
  • Tsutsui, Yoshiro

In this paper, we aim to elucidate whether effects related to supply or demand contributed to the Japanese “credit crunch” in the 1990s. Using prefectural panel data, we estimate loan supply and demand functions and calculate their shifts. Our analysis reveals that demand-side effects contributed to the Japanese credit crunch to an equal or greater degree than supply-side effects. Further, we show that the credit crunch was not uniform across Japan, but was more severe in urban relative to rural prefectures. These findings suggest that traditional countermeasures in the banking sector that similarly affect all prefectures may not induce economic recovery. Given this, we assert that region-specific policies may be more appropriate.

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Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 28 (2013)
Issue (Month): C ()
Pages: 41-52

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Handle: RePEc:eee:japwor:v:28:y:2013:i:c:p:41-52
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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