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Credit constraints and the current account: A test for the Japanese economy

  • Kunieda, Takuma
  • Shibata, Akihisa

This paper constructs a small open economy version of the Kiyotaki and Moore (1997) model along the line developed by Kasa (1998) and derives a closed-form solution of the current account dynamics. Using the solution, a null hypothesis of no credit constraints is tested for the Japanese economy. The empirical results show that the null hypothesis is strongly rejected and that the estimated signs of the parameters are consistent with the model. The Kiyotaki and Moore model gives an adequate description of the Japanese economy.

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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 24 (2005)
Issue (Month): 8 (December)
Pages: 1261-1277

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Handle: RePEc:eee:jimfin:v:24:y:2005:i:8:p:1261-1277
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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  1. Shibata, Akihisa & Shintani, Mototsugu, 1998. "Capital mobility in the world economy: an alternative test," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 741-756, October.
  2. Taizo Motonishi & Hirshi Yoshikawa, 1999. "Causes of the Long Stagnation of Japan During the 1990s: Financial or Real?," NBER Working Papers 7351, National Bureau of Economic Research, Inc.
  3. Paasche, Bernhard, 2001. "Credit constraints and international financial crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 623-650, December.
  4. Trehan, Bharat & Walsh, Carl E, 1991. "Testing Intertemporal Budget Constraints: Theory and Applications to U.S. Federal Budget and Current Account Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 206-23, May.
  5. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  6. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  7. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
  8. Kenneth Kasa, 1998. "Borrowing constraints and asset market dynamics: evidence from the Pacific Basin," Pacific Basin Working Paper Series 98-04, Federal Reserve Bank of San Francisco.
  9. Kiminori Matsuyama, 2001. "Good and Bad Investment: An Inquiry into the Causes of Credit Cycles," Discussion Papers 1335, Northwestern University, Center for Mathematical Studies in Economics and Management Science, revised Sep 2001.
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  11. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
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