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The International Transmission of Financial Shocks: The Case of Japan

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  • Peek, Joe
  • Rosengren, Eric S

Abstract

The size of Japanese bank lending operations in the United States enables the authors to use U.S. banking data to investigate the extent to which the sharp decline in Japanese stock prices was transmitted to the United States via U.S. branches of Japanese parent banks, as well as to identify a supply shock to U.S. bank lending that is independent of U.S. loan demand. They find that binding risk-based capital requirements associated with the Japanese stock market decline resulted in a decrease in lending by Japanese banks in the United States that was both economically and statistically significant. Copyright 1997 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 87 (1997)
Issue (Month): 4 (September)
Pages: 495-505

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Handle: RePEc:aea:aecrev:v:87:y:1997:i:4:p:495-505

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  1. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
  2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  3. Joe Peek & Eric Rosengren, 1993. "The Capital Crunch: Neither A Borrower Nor A Lender Be," Boston College Working Papers in Economics 243, Boston College Department of Economics.
  4. Robert N. McCauley & Rama Seth, 1992. "Foreign bank credit to U.S. corporations: the implications of offshore loans," Quarterly Review, Federal Reserve Bank of New York, issue Spr, pages 52-65.
  5. Kenneth R. French & James M. Poterba, 1990. "Were Japanese Stock Prices Too High?," NBER Working Papers 3290, National Bureau of Economic Research, Inc.
  6. Allen B. Frankel & Paul B. Morgan, 1992. "Deregulation and competition in Japanese banking," Proceedings 383, Federal Reserve Bank of Chicago.
  7. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
  8. Joe Peek & Eric Rosengren, 1993. "Bank regulation and the credit crunch," Working Papers 93-2, Federal Reserve Bank of Boston.
  9. Hall, B.J., 1993. "How Has the Basle Accord Affected Bank Portfolios?," Harvard Institute of Economic Research Working Papers 1642, Harvard - Institute of Economic Research.
  10. Henry S. Terrell, 1993. "U.S. branches and agencies of foreign banks: a new look," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 913-925.
  11. Jeremy C. Stein, 1998. "An Adverse-Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 466-486, Autumn.
  12. Gibson, Michael S, 1995. "Can Bank Health Affect Investment? Evidence from Japan," The Journal of Business, University of Chicago Press, vol. 68(3), pages 281-308, July.
  13. James, Christopher, 1987. "Some evidence on the uniqueness of bank loans," Journal of Financial Economics, Elsevier, vol. 19(2), pages 217-235, December.
  14. Joe Peek & Eric S. Rosengren, 1995. "Banks and the availability of small business loans," Working Papers 95-1, Federal Reserve Bank of Boston.
  15. Daniel E. Nolle & Rama Seth, 1996. "Do banks follow their customers abroad?," Research Paper 9620, Federal Reserve Bank of New York.
  16. Allen B. Frankel & Paul B. Morgan, 1992. "Deregulation and competition in Japanese banking," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 579-593.
  17. Sun Bae Kim & Ramon Moreno, 1994. "Stock prices and bank lending behavior in Japan," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue feb11.
  18. Prowse, Stephen D., 1990. "Institutional investment patterns and corporate financial behavior in the United States and Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 43-66, September.
  19. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
  20. Slovin, Myron B & Sushka, Marie E & Polonchek, John A, 1993. " The Value of Bank Durability: Borrowers as Bank Stakeholders," Journal of Finance, American Finance Association, vol. 48(1), pages 247-66, March.
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