WP Global Economy 2017.03.22
We study the features of regional business cycles and growth in Japan. We fi nd evidence of unconditional convergence over the 1955- 2008 period. For the 1975-2008 period, we fi nd evidence of conver- gence conditional on TFP gap, population growth, private investment rate and TFP growth. We also nd that the consumption-output correlation puzzle exists, which implies that the idiosyncratic income shocks are not shared among prefectures and regions. Our analysis implies that frictions in fi nancial markets are responsible for the low consumption risk-sharing among prefectures.