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The Morning After: Explaining the Slowdown in Japanese Growth in the 1990's

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  • Mr. Tamim Bayoumi

Abstract

This paper uses vector autoregressions (VARs) to investigate four explanations of the extended slump in Japanese economic activity during the 1990s: the absence of bold and consistent fiscal stimulus; limited room for expansionary monetary policy because of a liquidity trap; asset price deflation reflecting the long-term problems caused by overinvestment, inadequate returns on saving, and debt overhang; and disruption of financial intermediation. The results indicate that disruption in financial intermediation, largely operating through the impact of changes in domestic asset prices on bank lending, has been the principal case of the slump.

Suggested Citation

  • Mr. Tamim Bayoumi, 1999. "The Morning After: Explaining the Slowdown in Japanese Growth in the 1990's," IMF Working Papers 1999/013, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1999/013
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    1. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
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    More about this item

    Keywords

    WP; asset; fiscal policy; lending; slump; levels terms; Economic slump; financial intermediation; tax hike; share price; asset price effect; asset deflation; rate of return; household assets; asset price change; stimulus package; lending constraint; innovations in asset price; Exogenizing land price; Asset prices; Bank credit; Land prices; Real interest rates; Asia and Pacific;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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