Working Paper Number
This paper uses a modified Harrodian model to understand both the long period of rapid Japanese growth and the recent period of stagnation. The model has multiple steady-growth solutions when the labour supply is highly elastic, and government intervention, we argue, took the Japanese economy onto a high-growth trajectory. Labour constraints began to appear around 1970, and a combination of high saving rates and slow population growth account for the stagnation of the 1990s. This combination produces a structural liquidity trap and threatens the sustainability of attempts to ensure near full employment through …fiscal policy or by running a persistent trade surplus.
Nakatani, Takeshi and Skott, Peter, "Japanese growth and stagnation: a Keynesian perspective" (2006). Economics Department Working Paper Series. 57.