Working Paper: NBER ID: w12142
Authors: Charles Yuji Horioka
Abstract: In this paper, I analyze the causes of the prolonged slowdown of the Japanese economy in the 1990s and find that the stagnation of investment, especially private fixed investment, was the primary culprit. I then investigate the causes of the stagnation of household consumption during the 1990s and find that the stagnation of household disposable income, the decline in household wealth, and increased uncertainty about the future are among the contributing factors. Finally, I consider whether demand side factors or supply side factors were more important as causes of the prolonged slowdown of the Japanese economy in the 1990s and conclude that the former (especially misguided government policies) were probably more important.
Keywords: Japan; economic slowdown; household consumption; investment; government policy
JEL Codes: D12; E21; E32; O47; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stagnation of investment (E22) | Economic slowdown (F69) |
| Household disposable income (D19) | Household consumption (D10) |
| Household wealth (G59) | Household consumption (D10) |
| Increased uncertainty about the future (D89) | Household consumption (D10) |
| Government policies (H59) | Economic slowdown (F69) |
| Government policies (H59) | Household consumption (D10) |
| Government policies (H59) | Stagnation of investment (E22) |