A BEJM Topics article.

Abstract

This paper studies the Japanese depression in the interwar period using the business cycle accounting methodology and a general equilibrium model with time-varying markups. I find that the initial slowdown of the economy can be explained by a decline in productivity. However, I also find that when only productivity change is taken into account, a prototype neoclassical growth model predicts that in the 1930s, output recovers more rapidly than is actually supported by the data. Using restrictions from theory, I quantify the contribution of an increase in markups in the manufacturing and mining sectors and find that a substantial fraction of the weak recovery can be explained by this factor. I argue that this increase in markups is caused by government-promoted cartelization.

Submitted: July 14, 2007 · Accepted: September 4, 2008 · Published: September 12, 2008

Recommended Citation

Saijo, Hikaru (2008) "The Japanese Depression in the Interwar Period: A General Equilibrium Analysis," The B.E. Journal of Macroeconomics: Vol. 8 : Iss. 1 (Topics), Article 25.
Available at: http://www.bepress.com/bejm/vol8/iss1/art25