Date of Submission
Project Advisor 1
Dimitri B. Papadimitriou
This paper investigates the driving factors of Japan’s stagnation for over 20 years. Through reading various studies and reports, the main factors considered in this econometric study are the government policies, including fiscal and monetary policies, demographic change, and the international competition. These are represented by government spending, interest rates, age dependency ratio, and net export, respectively. The Vector Autoregression (VAR) Model is used in two separate periods. The findings show that for the first period (1991-2000), the age dependency ratio, net exports and interest rate slowed down the economy; however, for the second period, the net exports became the only statistically significant factor using the same method. The balance of trade appears to be a consistent variable that influences the real GDP growth rate, indicating that Japan’s loss of competitiveness in the global market plays a role in Japan’s long stagnation from 1988 to 2012. This paper contributes to the existing literature on Japan’s Lost Decade by offering another way to analyze the determinants of Japan’s economic stagnation during this critical period. By identifying the key factors driving low growth in each phase, this study sheds light on the complex interactions of demographic, policy, and international dynamics that shaped Japan’s economic situation. (Senior Project submitted to The Division of Social Studies of Bard College).
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Sun, Mingche, "Unraveling the Enigma of Japan’s Lost Decades: An Econometrics Study using VAR Model" (2023). Senior Projects Spring 2023. 162.
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