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Did the Financial Crisis in Japan Affect Household Welfare Seriously?

Author

Listed:
  • Yasuyuki Sawada

    (Faculty of Economics, University of Tokyo)

  • Kazumitsu Nawata

    (Graduate School of Engineering, University of Tokyo)

  • Masako Ii

    (School of International and Public Policy, Hitotsubashi University)

  • Mark J. Lee

    (Department of Economics, Towson University)

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.

Suggested Citation

  • Yasuyuki Sawada & Kazumitsu Nawata & Masako Ii & Mark J. Lee, 2010. "Did the Financial Crisis in Japan Affect Household Welfare Seriously?," Working Papers 2010-11, Towson University, Department of Economics, revised Apr 2010.
    • Handle: RePEc:tow:wpaper:2010-11
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On the cost of financial crises
      by Economic Logician in Economic Logic on 2010-06-02 20:39:00

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    Cited by:

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    2. Sawada, Yasuyuki & Takasaki, Yoshito, 2017. "Natural Disaster, Poverty, and Development: An Introduction," World Development, Elsevier, vol. 94(C), pages 2-15.
    3. Assaf Razin & Steven Rosefielde, 2011. "Currency and Financial Crises of the 1990s and 2000s," CESifo Economic Studies, CESifo, vol. 57(3), pages 499-530, September.
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    More about this item

    Keywords

    Credit crunch; Consumption Euler equation; Household Welfare.;
    All these keywords.

    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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