Financial Accelerator Effects in Japan's Business Cycles

Abstract

How do financial factors due to credit-market imperfections affect economic fluctuations? This paper calibrates a dynamic general equilibrium model incorporating credit-market imperfections using Japanese data. The model exhibits financial accelerator effects, the mechanism whereby credit-market imperfections help to propagate or amplify initial shocks to the economy. Our main result is that the large volatility of Japan's corporate investment can be explained by taking account of this mechanism. We examine the robustness of the results and consider some variations of the model including the adoption of alternative monetary policy rules and the introduction of an asset price bubble.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 17 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.