FINANCIAL DISTRESS AND INDUSTRY STRUCTURE: AN INTER-INDUSTRY APPROACH TO THE LOST DECADE IN JAPAN

Kazuo Ogawa*, Elmer Sterken, Ichiro Tokutsu

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
168 Downloads (Pure)

Abstract

This paper proposes a novel approach to investigating the propagation mechanism of balance sheet deterioration in financial institutions and firms, by extending the input-output analysis. First, we use a unique input-output table augmented by firm size dimension. Second, we link the input-output table with the balance sheet conditions of financial institutions and firms. Based on Japanese input-output tables, we find that the lending attitude of financial institutions affected firms' input decision in the late 1990s and the early 2000s. Simulation exercises are conducted to evaluate the effects of changes in the lending attitude toward small firms as favorable as that toward large firms on sectoral allocations. We find that output was increased for small firms and reduced for large firms. The change in output was non-negligible, about 5.5% of the initial output of each sector. In particular, it exceeded 20% in textile, iron and steel and fabricated metal products.

Original languageEnglish
Pages (from-to)229-249
Number of pages21
JournalEconomic Systems Research
Volume24
Issue number3
DOIs
Publication statusPublished - 10-Jul-2012

Keywords

  • Input-output analysis
  • Trade credit
  • Balance sheet
  • Multiplier
  • TRADE CREDIT
  • SECTORAL COMOVEMENT
  • FLUCTUATIONS
  • CONTAGION
  • CHAINS
  • SHOCKS

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