Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan |
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| Affiliation: | 1. Dongguk Business School, Dongguk University, 3-26 Pil-dong, Chung-gu, Seoul 100-715, South Korea;2. Economist, Macroprudential Analysis Department, The Bank of Korea, 110, Namdaemunro 3-Ga, Jung-Gu, Seoul 100-794, South Korea;1. Hitotsubashi University, Japan;2. RIETI, Japan;3. TCER, Japan;4. IZA, Germany;5. Ryutsu Keizai University, Japan;1. The World Bank, Development Prospects Group, 1818 H St NW, Washington, DC 20433, United States;2. University of Duisburg-Essen, Chair of International Economics, Institute for Economics and Business Administration, Universitätsstr. 12, D-45117 Essen, Germany;1. College of Industry and Information Science, Okinawa International University2-6-1, Ginowan, Ginowan City, Okinawa, 9012701 JAPAN;2. Japan Railway Construction, Transport and Technology Agency, 6-50-1, Honcho, Naka-ku, Yokohama, Kanagawa 231-8315 Japan;3. Department of Policy Studies, Nanzan University Japan 18 Yamazato-cho, Showa-ku, Nagoya 466–8673 JAPAN;4. Department of Urban and Environmental Engineering School of Engineering,Kyushu University 744 Motooka, Nishi-ku, Fukuoka, 819-0395 JAPAN |
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| Abstract: | We use micro data on young married households from the Japanese Panel Survey of Consumers in order to analyze the importance of borrowing constraints in Japan. We find (1) that 8–15 percent of young married Japanese households are borrowing-constrained, (2) that household assets and the husband's educational attainment are the most important determinants of whether or not a household is borrowing-constrained, and (3) that the Euler equation implication is rejected for both the full sample and for the subsample of unconstrained households. These results suggest that the life cycle/permanent income hypothesis does not apply in Japan and that the presence of borrowing constraints is not the main reason why it does not apply. |
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