2009 Reports

An Exploration of the Japanese Slowdown during the 1990s

Comin, Diego

Two striking aspects of the Japanese stagnation of the 1990s are its severity and especially
its persistence. Over the 1983-1991 period, TFP grew at a more than respectable rate
of 2.4 percent. It fell to an average of 0.2 percent for 1991-2000. We know from Cogley
and Nason (1995) that the persistence in real business cycles models comes from the
persistence of the shocks. However, none of the shocks that arguably have hit the Japanese
economy seem to have persisted for a decade. This implies that a successful account of
the Japanese stagnation requires a model where the propagation mechanisms generate a
significant amount of persistence.