IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_5908.html
   My bibliography  Save this paper

Regional Heterogeneity, the Rise of Public Debt and Monetary Policy in Post-Bubble Japan: Lessons for the EMU

Author

Listed:
  • Raphael Fischer
  • Gunther Schnabl

Abstract

Both Japan and parts of the European Monetary Union have experienced boom and bust in stock and real estate markets, which have been followed by a lasting crisis. The paper analyses the role of a high degree of regional heterogeneity for public debt and monetary policy in the context of crisis. It is shown for Japan that the attempts to maintain regional cohesion via a regional transfer mechanism has contributed to the unprecedented rise in public debt and persistent monetary expansion. Econometric estimations show that in Japan regional redistribution of funds has ensured homogeneous living conditions across Japanese regions pre- and post-crisis. The side condition is monetary expansion. A similar effect could emerge in Europe, if the crisis persists.

Suggested Citation

  • Raphael Fischer & Gunther Schnabl, 2016. "Regional Heterogeneity, the Rise of Public Debt and Monetary Policy in Post-Bubble Japan: Lessons for the EMU," CESifo Working Paper Series 5908, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5908
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5908.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fumio Hayashi & Edward C. Prescott, 2004. "The 1990s in Japan: a lost decade," Chapters,in: The Economics of an Ageing Population, chapter 2 Edward Elgar Publishing.
    2. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 468-508, August.
    3. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    4. Arghyrou, Michael G. & Kontonikas, Alexandros, 2012. "The EMU sovereign-debt crisis: Fundamentals, expectations and contagion," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 658-677.
    5. Gunther Schnabl, 2015. "Monetary Policy and Structural Decline: Lessons from Japan for the European Crisis," Asian Economic Papers, MIT Press, vol. 14(1), pages 124-150, Winter/Sp.
    6. Takero Doi, 2010. "Poverty Traps With Local Allocation Tax Grants In Japan," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 466-487, December.
    7. Johannes Mayr, 2008. "The Financial Crisis in Japan – Are There Similarities to the Current Situation?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(4), pages 64-68, December.
    8. 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.
    9. Woo, David, 2003. " In Search of "Capital Crunch": Supply Factors behind the Credit Slowdown in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 1019-1038, December.
    10. Hubert Gabrisch & Karsten Staehr, 2015. "The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 53(3), pages 558-576, May.
    11. Ansgar Belke & Ulrich Haskamp & Gunther Schnabl, 2018. "Beyond Balassa and Samuelson: real convergence, capital flows, and competitiveness in Greece," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(2), pages 409-424, May.
    12. 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.
    13. José Abad & Axel Löffler & Gunther Schnabl & Holger Zemanek, 2013. "Fiscal divergence, current account divergence and TARGET2 imbalances in the EMU," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 48(1), pages 51-58, January.
    14. Ronald I. McKinnon & Kenichi Ohno, 1997. "Dollar and Yen: Resolving Economic Conflict between the United States and Japan," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133350, March.
    15. Ishi, Hiromitsu, 2001. "The Japanese Tax System," OUP Catalogue, Oxford University Press, edition 3, number 9780199242566.
    16. Hubert Gabrisch & Karsten Staehr, 2014. "The Euro Plus Pact: Cost Competitiveness and External Capital Flows in the EU Countries," WWWforEurope Policy Paper series 15, WWWforEurope.
    17. Schnabl, Gunther & Wollmershäuser, Timo, 2013. "Fiscal Divergence and Current Account Imbalances in Europe," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79899, Verein für Socialpolitik / German Economic Association.
    18. repec:lmu:muenar:19832 is not listed on IDEAS
    19. Uwe Vollmer & Ralf Bebenroth, 2012. "The Financial Crisis in Japan: Causes and Policy Reactions by the Bank of Japan," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 9(1), pages 51-77, April.
    20. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
    21. Dermot Hodson, 2013. "The Eurozone in 2012: ‘Whatever It Takes to Preserve the Euro'?," Journal of Common Market Studies, Wiley Blackwell, vol. 51, pages 183-200, September.
    22. David Woo & Akihiro Kanaya, 2000. "The Japanese Banking Crisis of the 1990's; Sources and Lessons," IMF Working Papers 00/7, International Monetary Fund.
    23. Masahiko Shibamoto & Minoru Tachibana, 2013. "The Effect of Unconventional Monetary Policy on the Macro Economy: Evidence from Japan's Quantitative Easing Policy Period," Discussion Paper Series DP2013-12, Research Institute for Economics & Business Administration, Kobe University.
    24. Christoph A. Schaltegger & Martin Weder, 2013. "Will Europe Face A Lost Decade? A Comparison With Japan's Economic Crisis," CREMA Working Paper Series 2013-03, Center for Research in Economics, Management and the Arts (CREMA).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Japan; EMU; crisis; regional redistribution; monetary policy; public debt;

    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_5908. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.