Empirical Analysis of the Crowding out Occurring in Corporate Finance (Japanese)

This paper verifies the real effects of fiscal consolidation using the empirical model built upon the theoretical explanations about the real effects of public debt accumulation elaborated in Shoji (2013), and it aims at identifying the mechanism of the economic stagnation characterized by low interest rates, which has been an unsolved mystery pertaining to the Japanese economy. This article, in particular, focuses on the crowding out that arises due to credit constraints in corporate finance. The results of this study show that an accumulation of government debt has negative impacts on the real economy through (i) disturbing the supply of funds to the private sector, (ii) discouraging capital investment by leading to a rise in real interest rate or a fall in the expected return, and (iii) reducing public investment by leading to financial rigidity. Furthermore, the results highlight the implication that the effects of monetary policy are limited. These results highlight the implication of the necessity of fiscal consolidation.