Page 148 - Special Topic Session (STS) - Volume 2

STS474 Gigih F. et al.

Analysis of regional economic growth against
crisis: US-Japan statistical comparative study
before-after Lehman’s shock
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1
Gigih Fitrianto , Shojiro Tanaka , Ryuei Nishii
1 Graduate School of Economics, Hiroshima University of Economics, Hiroshima, Japan
2 Professor, Faculty of Media Business, Hiroshima University of Economics, Hiroshima, Japan
3 Professor, Office for Establishment of an Information-related School, Nagasaki University,
Nagasaki, Japan

Abstract
This paper applied several statistical methods for detecting structural change,
such as: F-test and Wald-test based on broken time-trend model (Greene,
2012) to analyze the effect of Lehman’s crisis towards regional economic
growth in US and Japan. This paper also observed the spatial neighboring
factor toward the impact of crisis across regional economies. F-test performed
better than Wald test for spatially-independent model. On the other hand, in
spatially-dependent model Wald test produced better results. It endorsed the
endogeneity (explanatory variable correlated with error term) in spatially-
dependent model might imply the F-test become non-robust for
autocorrelated disturbances (Krӓmer, 2003). In the US, it was revealed that the
negative impact of crisis clustered in West Coast, Southeastern, and Great Lake
regions. States in those regions with good manufacturing, construction,
insurance, and finance as the main contributor for their gross regional product.
On the other hand, states that relied on agriculture, forestry, fishing, hunting,
and mining sectors had resilience, the results of which were obtained by the
tests. In Japan, it was confirmed that the shock spread-out across all the
regions. After the crisis, most prefectures showed recoveries. Several other
prefectures showed negative trend, such as Nagasaki.

Keywords
Neighbor Effect; Spatial Analysis; Structural Change

1. Introduction
One of the biggest economic crises, the Lehman’s shock began the fall of
US housing prices in 2007 which cause sub-prime crisis. These defaults spread-
out to the financial sector (Reinhart & Rogoff, 2008) and interbank markets
from August 2007 (BIS Report, 2009). The crisis was transmitted globally from
two main channels: global financial interconnections (Longstaff, 2010; Aloui,
Aissa, & Nguyen, 2011); and trade flows (Ahn, Amiti, & Weinstein, 2011;
Cetorelli & Goldberg, 2011).

In Japan, the impact of Lehman’s crisis heavily damaged the Japan
economy from 2008. In 2008, Japan had a trade deficit and in 2009 the export
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