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The 1990s in Japan: A Lost Decade

Author

Listed:
  • Fumio Hayashi

    (University of Tokyo)

  • Edward C. Prescott

    (University of Minnesota)

Abstract

This paper examines the Japanese economy in the 1990s, a decade of economic stagnation. We find that the problem is not a breakdown of the financial system, as corporations large and small were able to find financing for investments. There is no evidence of profitabkle investment opportunities not being exploited due to lack of access to capital markets. The problem then and still today is a low productivity growth rate. Growth theory, treating TFP as exogenous, accounts well for the Japanese lost decade of growth. We think that research effort should be focused on what policy change will allow productivity to again grow rapidly. (Copyright: Elsevier)

Suggested Citation

  • Fumio Hayashi & Edward C. Prescott, 2002. "The 1990s in Japan: A Lost Decade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 206-235, January.
  • Handle: RePEc:red:issued:v:5:y:2002:i:1:p:206-235
    DOI: 10.1006/redy.2001.0149
    Note: A data appendix is available
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    References listed on IDEAS

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    1. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    2. Ogawa, Kazuo & Suzuki, Kazuyuki, 1998. "Land Value and Corporate Investment: Evidence from Japanese Panel Data," Journal of the Japanese and International Economies, Elsevier, vol. 12(3), pages 232-249, September.
    3. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters,in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212 National Bureau of Economic Research, Inc.
    4. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    5. Anil K. Kashyap & Jeremy C. Stein, 1994. "Monetary Policy and Bank Lending," NBER Chapters,in: Monetary Policy, pages 221-261 National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    growth model; TFP; Japan; workweek.;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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