Structural VAR analysis of debt, capital accumulation, and income distribution in the Japanese economy: a Post Keynesian perspective

This paper investigates the dynamic relationships among income distribution, debt ratio, and capital accumulation in the Japanese economy post 1990s. The paper identifies the contemporaneous linkages and investigates the dynamic relationships among the three variables in the vector autoregression (VAR) model on the basis of the Post Keynesian model. The accumulated impulse response functions of the structural VAR indicate that although profit share sustains capital accumulation, a high debt ratio restrains it. In other words, the income distribution-capital accumulation pattern of the Japanese economy over the past 20 years has been a profit-led one, and the debt-capital accumulation pattern over the same period has been a debt-burdened one.