Japan project.

Members of the NBER's Japan Project, directed by Anil K Kashyap of NBER and the University of Chicago, met in Menlo Park, California on February 6. Their program was:

Ramana Ramaswamy, International Monetary Fund, and Christel Rendu, London Business School, "Japan's Stagnant Nineties: A Vector Autoregression Retrospective"

Discussant: Ben S. Bernanke, NBER and Princeton University

Michael D. Bordo, NBER and Rutgers University, and Jongwoo Kim, Rutgers University, "The Relationship between the Monetary Regime and Output: A Structural VAR Model of the Japanese Experience, 1919-96"

Discussant: Kenneth D. West, NBER and University of Wisconsin

Kenji Nishizaki and Tsutomu Watanabe, Bank of Japan, "Output-Inflation Tradeoff at Near-Zero Inflation Rates"

Discussant: Christopher D. Carroll, NBER and Johns Hopkins University

Hisashi Nakamura and Shigenori Shiratsuka, Bank of Japan, "Extracting Market Expectations from Option Prices: Case Studies in Japanese Option Markets"

Discussant: Kent D. Daniel, NBER and Northwestern University

Lee G. Branstetter, NBER and the University of California, Davis, and Mariko Sakakibara, the University of California, Los Angeles, "The Effect of Patent Systems on Firm Innovation: Evidence from the 1988 Japanese Patent Law Reforms" (see "Patent Systems and Innovation" earlier in this issue)

Discussant: Charles I. Jones, NBER and Stanford University

Ramaswamy and Rendu ask what slowed Japanese growth during the 1990s. They show that negative shocks to residential and nonresidential investment were important. The negative shocks to private investment essentially reflect the 1990s unwinding of the overinvestment that took place in the second half of the 1980s. Despite the massive collapse of asset prices in 1990s Japan, negative shocks to private consumption were relatively small. This most likely reflects low household ownership of equities and a lack of urgency about increasing precautionary savings because of the low unemployment rate. The authors conclude, somewhat surprisingly, that negative shocks to public consumption did play a role in dampening activity in the 1990s. They attribute this to Japanese policy choices in the 1990s which favored public investment over public consumption. The external sector was not a major deterrent to activity despite the significant appreciation of the yen in the first half of the decade.

Bordo and Kim examine the relationship between the exchange rate or monetary regime and the path...