Japan's financial crises and lost decades

Naohisa Hirakata, Nao Sudo, Ikuo Takei, Kozo Ueda

    Research output: Contribution to journalArticle

    5 Citations (Scopus)


    In this paper, we explore the role of financial intermediation malfunction in macroeconomic fluctuations in Japan. To this end we estimate, using Japanese data, a financial accelerator model in which the balance sheet conditions of entrepreneurs in a goods-producing sector and those of a financial intermediary affect macroeconomic activity. We find that shocks to the balance sheets of the two sectors have been quantitatively playing important role in macroeconomic fluctuations by affecting lending rates and aggregate investments. Their impacts are prominent in particular during financial crises. Shocks to the entrepreneurs’ balance sheets have played a key role in lowering investment in the bubble burst during the early 1990s and in the global financial crisis during the late 2000s. Shocks to the financial intermediaries’ balance sheets have persistently lowered investment throughout the 1990s.

    Original languageEnglish
    Pages (from-to)31-46
    Number of pages16
    JournalJapan and the World Economy
    Publication statusPublished - 2016 Dec 1


    • Banks’ Balance sheet
    • Financial accelerators
    • Japan's lost decade

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics
    • Political Science and International Relations

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