Working Paper: NBER ID: w10938
Authors: James Harrigan; Kenneth Kuttner
Abstract: In 1991, the Japanese economy ended a historic expansion and entered a period of stagnation that has yet to abate. Nine years later, the US economy ended a similarly historic expansion. There were many similarities in the two countries' expansions: asset price bubbles, a real investment boom, easy monetary policy, and improvements in government finances. In the wake of bursting bubbles, the Japanese banking system was insolvent and monetary policy was too tight, problems not evident in the US post-bubble period. But the US has worse fiscal and current account imbalances than Japan had at the same stage in the post-bubble era.
Keywords: No keywords provided
JEL Codes: E32; E58; E65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal Reserve's aggressive rate cuts (E52) | US economy recovery (O51) |
| Bank of Japan's slower response (E52) | Japan's economic stagnation (N15) |
| Differences in fiscal and monetary policy responses (E63) | Economic outcomes in US and Japan (F69) |
| Federal Reserve's actions (E52) | Avoidance of deflation in US (E31) |
| US's fiscal and current account imbalances (F32) | Risks for US economy's future (F65) |