- 季刊経済理論 (ISSN:18825184)
- vol.47, no.3, pp.67-78, 2010-10-20 (Released:2017-04-25)
This paper examines income distribution and demand formation pattern of the Japanese economy. The VAR model is a time series model which does not depend on a particular economic theory, and theoretical stance of the analyst can be found in variables included in the model or evaluation of the result. In this paper, post-Keynesian model is used for theoretical reference. The post-Keynesian model has revealed the mechanism of wage- and profit-led growth regimes, so far. It is theoretically well known that under what conditions they can be realized. However, it is only from empirical analysis that we can distinguish which regime is more dominant in each era or in each country. This issue has been examined especially for European and American economies, but there are few studies on the Japanese economy. Moreover, post-Keynesian growth and distribution theory emphasizes the dynamic linkage among income distribution, demand component and aggregate demand, but using this viewpoint is quite important in order to understand the causes of the recent Japanese low economic growth. In fact, many have remarked that up-down of wage share, stagnation of consumption, and cyclical behavior of investment and export are determinants of the recent Japanese macroeconomic performance. Taking into consideration the fact that such performance fits exactly the post-Keynesian viewpoint, and many factors concern this macroeconomic performance via interdependent manner, we can consider that the VAR model is a useful tool for examining our purpose. Therefore, this paper estimates a VAR model which includes income distribution, growth rate of consumption, export demand, GDP, and capital accumulation rate. Based on the impulse-response function and variance decomposition, we present an empirical investigation of the Japanese macroeconomic performance. Our results say that the profit-led demand formation pattern was dominant during 1985 and 2008 in the Japanese economy. In this regime, both domestic and external demands present positive relationship with GDP growth. That is, these demand components have a possibility to expand economic growth. In the bubble periods, active consumption and investment realized with rise in asset price and improvement of economic outlook sustained a favorable macroeconomic performance. On the contrary, after bubble burst, a rise in labor share did not maintain consumption demand, and investment demand also stagnated due to deterioration of profitability, stock adjustment and credit crunch. As a result, macroeconomic performance was not sustainable one. Hence, it can be said that the Japanese economy failed to realize a domestic demand-led growth since the 1990s. After 2002, export demand expanded while profit share recovered, which induced expansion of investment. As a result, led by the external demand the Japanese macroeconomic performance turned to a favorable performance until the Subprime shock.