CIRJE-F-498 | "Did the Credit Crunch in Japan Affect Household Welfare? An Augmented Euler Equation Approach Using Type 5 Tobit Model" |
Author Name | Sawada, Yasuyuki, Kazumitsu Nawata, Masako Ii, and Jeong-Joon Lee |
Date | May 2007 |
Full Paper | PDF file |
Remarks | Title changed and forthcoming as Yasuyuki Sawada, Kazumitsu Nawata, Masako Ii, and Mark J. Lee "Did the Financial Crisis in Japan Affect Household Welfare Seriously?", Journal of Money, Credit, and Banking 43(2-3), 297-324, 2011. |
Abstract |
We investigate whether the credit crunch in Japan affected household welfare and the manner in which it did. We augment the theoretical framework of a consumption Euler equation with endogenous credit constraints and estimate it with household panel data for 1993-1999, generating several empirical findings. First, a small portion of the people faced credit constraints in Japan before and after the financial crisis in 1997. Accordingly, our results reject the standard consumption Euler equation. Second, the credit crunch affected household welfare negatively, albeit not seriously, after 1997. Our results corroborate that the credit crunch in Japan was supply-driven. |