Causes of the Long Stagnation of Japan During the 1990s: Financial or Real?

39 Pages Posted: 30 Apr 2000 Last revised: 4 Aug 2022

Date Written: September 1999

Abstract

Corporate investment is the most important factor to explain the long stagnation of Japan during the 1990's. Using the Bank of Japan diffusion indices of real profitability' and banks' willingness to lend', we estimate investment functions for four groups of firms: large/small and manufacturing/non-manufacturing. Our results suggest that for large firms, financing constraints are not significant whereas the converse is true for small firms. A fall of investment during 1992-94 is largely explained by real factors. However, the credit crunch occurred beginning 1997 and it lowered the growth rate of GDP by 1.6%.

Suggested Citation

Motonishi, Taizo and Yoshikawa, Hiroshi, Causes of the Long Stagnation of Japan During the 1990s: Financial or Real? (September 1999). NBER Working Paper No. w7351, Available at SSRN: https://ssrn.com/abstract=194678

Taizo Motonishi (Contact Author)

Nagasaki University ( email )

4-2-1 Katafuchi
Nagasaki 850-8506
Japan

Hiroshi Yoshikawa

Rissho University ( email )

4-2-16, Osaki, Shinagawa-ku
Tokyo 141-8802
Japan
+81334927529 (Phone)

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