Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan

No 12330, NBER Working Papers from National Bureau of Economic Research, Inc

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 to 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.

JEL-codes: D1 D9 E2 G1 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-mac and nep-sea
Note: EFG
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Citations: View citations in EconPapers (24)

Published as Kohara, Miki & Horioka, Charles Yuji, 2006. "Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan," Japan and the World Economy, Elsevier, vol. 18(4), pages 358-377, December.

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Journal Article: Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan (2006)
Working Paper: Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan (2006)
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