In this paper, we construct a simple measure of sectoral credit shifts, defined as the dispersion of growth rates of bank loans across sectors, and investigate what effects they had on Japan's economy and what accounted for their development. We find that (i) during the 1990s, the amount of...

The endogenous creation of bank credit and of deposit money is modeled. If banks have a limited ability to commit to making interbank loans, then, in order for bank deposits to be accepted as liquid assets, an upper bound is placed upon the size of each bank's asset portfolio, where the bound is...

Despite the widespread belief that technology shocks are the main source of business fluctuations, recent empirical studies find that an investment efficiency shock mainly drives such fluctuations and reflects financial conditions for investment. This poses the question as to what is the major...

This paper surveys the empirical analyses that examine the effects of the Bank of Japan (BOJ)'s quantitative easing policy (QEP), which was implemented from March 2001 through March 2006. The survey confirms a clear effect whereby the commitment to maintain the QEP fostered the expectations that...

After the collapse of the asset price bubble, Japanese banks are said to have been reluctant to write off bad loans, even in cases where there is little prospect of borrower firms being able to repay the loans extended. This phenomenon is known as forbearance lending. We illustrate this using a...

The observed decline in the relative price of investment goods in Japan suggests the existence of investment-specific technological (IST) changes. This paper examines whether IST changes are a major source of business fluctuations in Japan, by estimating a dynamic stochastic general equilibrium...

We present an empirical analysis on the New Keynesian Wage Phillips Curve (NKWPC), which is derived by Gali (2011) as a micro-founded structural relationship between wage inflation and the unemployment rate under a sticky wage framework using data for Japan and the US. We find that the empirical...

This paper empirically examines the impact of financial constraints on Japanese firms' pricing behavior. In spite of a large swing in demand in the bubble era and the lost decade, aggregate prices did not fluctuate much in these periods. Such price rigidity can be explained by customer market...

In the standard new Keynesian models, the optimal inflation rate is zero while the long-run inflation rate is non-zero positive in many countries. In this paper, we provide a new rationale for the non-zero trend inflation by utilizing the productivity gap between the intermediate-goods sector...

After the collapse of the asset price bubble, especially over the period of declining prices of goods and services from the latter 1990s until recently, it is said that certain Japanese firms have been working to stimulate demand by active price adjustment. Nevertheless, over the same period,...