抄録
Japan has been trapped in a prolonged recession since the collapse of the bubble economy. From soon after the collapse, financial crisis spread throughout the economy. Many banks, big and small, were driven to bankruptcy. Neoclassical economists have pushed for market-oriented economic reforms in pursuit of efficiency. Economic liberalization and reduced government restrictions have actually been global trends since the 1980s. Amidst the numerous of market-oriented economic reforms promoted by the Koizumi cabinet to cope with the severe recession, the most ambitious has been the plan to privatize the post-office saving service. However, opponents of the plan insist that the post-office saving service and guidance policy finance have counterbalanced the failings of the financial intermediaries during the post-bubble period. In other words, they argue that the public finance system has been useful to prevent further financial crisis. Minsky (1975), on the other hand, has reevaluated Keynes's theory and proposed the financial instability hypothesis. According to this hypothesis, the complicated financial structure underlying the capitalist economy generates business fluctuations. Minsky's ideas have been studied extensively by various authors. Taylor and O'Connell (1985) demonstrated that an economy might fall into financial crisis when declines in expected profit rates aggravate the financial condition of firms and increase the household preference for liquidity. Post-office savings, however, are a risk-less asset. If the funds return to financial markets through guidance policy finance, the economy might not fall into a financial crisis. The main purpose of this paper is to examine the effects of guidance policy finance in a macro-dynamic model of financial instability. Our results demonstrate that guidance policy finance stabilizes an economy which has been destabilized by the financial factor alone. In short, guidance policy finance can be a useful instrument to prevent financial instability. We also demonstrate a financial cycle by applying the Hopf bifurcation theorem in our model of an economy destabilized by the financial factor alone.
