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

41 Pages Posted: 28 Feb 2000 Last revised: 14 Oct 2010

See all articles by Tamim Bayoumi

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

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Date Written: September 1999

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

Bayoumi, Tamim, The Morning after: Explaining the Slowdown in Japanese Growth in the 1990s (September 1999). NBER Working Paper No. w7350. Available at SSRN: https://ssrn.com/abstract=194679

Tamim Bayoumi (Contact Author)

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Centre for Economic Policy Research (CEPR)

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