Regional Economy from the Perspective of "Long-term Stagnation"—Analysis Based on the Estimation of Potential GDP by Prefecture—

Abstract

Many previous studies on "Potential Economic Growth" and "Growth Potential" of the Japanese economy have been undertaken. But the Semi-Macroeconomic Analysis at the prefectural level is limited due to data limitations. In this paper, therefore, we attempt to estimate the potential GDP of each of 47 prefectures based on our original calculation of capital stock data. Furthermore, using the estimated values, I set some hypothesis from the viewpoint of "long-term stagnation theory" that solves the factors of long-term stagnation in the market economy in recent years, and try to verify the regional economic sphere as an analysis target. Through empirical analysis on the potential growth rate and the movement of the GDP gap, it is clear that many prefectures in Japan are "long-term stagnation due to a shortage of demand" and that especially the situation is same for the Tokyo metropolitan area centered on Tokyo, but that other local areas are "long-term stagnation due to a supply shortage".