In this study, we explain the driving forces behind the secular stagnation associated with a persistent decrease in interest rates. To do so, we employ a model that incorporates a crisis risk triggered by an accumulation of government debt. The model shows that the fear of large-scale taxation...

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...

Economic growth slows for an extended period after a financial crisis. We construct a model in which a one-time buildup of debt can depress the economy persistently, even when there is no financial technology shock. We consider the debt dynamics of firms under endogenous borrowing constraints,...

Economic growth slows for an extended period after a financial crisis. We construct a model in which a one-time buildup of debt can depress the economy persistently, even when there is no financial technology shock. We consider the debt dynamics of firms under endogenous borrowing constraints,...