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Did the Financial Crisis in Japan Affect Household Welfare Seriously?

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  • YASUYUKI SAWADA
  • KAZUMITSU NAWATA
  • MASAKO II
  • MARK J. LEE

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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Suggested Citation

  • 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, March.
    • Handle: RePEc:mcb:jmoncb:v:43:y:2011:i::p:297-324
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    1. On the cost of financial crises
      by Economic Logician in Economic Logic on 2010-06-02 20:39:00

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    3. Roberto Álvarez & Luis Opazo, 2013. "Household Debt During the Financial Crisis: Micro-Evidence from Chile," Working Papers Central Bank of Chile 695, Central Bank of Chile.
    4. Yasuyuki Sawada, 2017. "Disasters, Household Decisions, and Insurance Mechanisms: A Review of Evidence and a Case Study from a Developing Country in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(1), pages 18-40, January.
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    6. Ciula, Raffaele, 2023. "Poverty and socio-financial inclusion in Japan," MPRA Paper 116760, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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