IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Accounting for the 'Lost Decade' in Japan

Listed author(s):
  • Suparna Chakraborty

    (Federal Reserve Bank of Minneapolis & University of Minnesota)

There is no debate amongst economists that Japan performed poorly during the1990s. This can be seen in falling growth rates of GDP per capita, investment per capita and mounting problems of non performing loans and ballooning Government deficit. A lot of models have tried to come up with an explanation for the Lost Decade. However, none of them have yet been able to clearly account for the growth slump. At this point, it is necessary to revisit all possible distortions that might have caused the dismal performance during the 1990s. This would help us to correctly identify the possible problem areas and search for more specific causes of downturn of the economy in a considerably narrowed field. In this paper, I have tried to bring together the different proposed theories in a consolidated way to help isolate promising theories from not so promising ones. To do so, I applied the Business Cycle Accounting procedure developed by V V Chari, Ellen R McGrattan and Patrick Kehoe to the Japanese case. I find that efficiency wedge is important in explaining the dismal performance of the Japanese economy during the 1990s but labor wedge is not very important except for a brief span of time during 1996 to 1997. My most important result is that investment wedge played a major role in the performance of the Japanese economy during the 1990s. So, any model that tries to focus on what went wrong in Japan in 1990s would do well to focus on frictions on productivity and investment financing that might be at the root of the dismal performance of the Japanese economy.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by EconWPA in its series Macroeconomics with number 0408009.

in new window

Length: 51 pages
Date of creation: 13 Aug 2004
Handle: RePEc:wpa:wuwpma:0408009
Note: Type of Document - pdf; pages: 51
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0408009. 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: (EconWPA)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.