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

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  • Tamim Bayoumi

Abstract

This paper uses a VAR to investigate four possible explanations of the extended slump in Japanese economic activity over the 1990s: the absence of bold and consistent fiscal stimulus; the limited room for expansionary monetary policy due to a liquidity trap; overinvestment and debt overhang; and disruption of financial intermediation. The results indicate that all of these factors played a role, but that the major explanation is disruption in financial intermediation, largely operating through the impact of changes in domestic asset prices on bank lending.

Suggested Citation

  • Tamim Bayoumi, 1999. "The Morning After: Explaining the Slowdown in Japanese Growth in the 1990s," NBER Working Papers 7350, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7350
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    More about this item

    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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