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Bank Integration and Transmission of Financial Shocks: Evidence from Japan

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  • Masami Imai
  • Seitaro Takarabe
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    Abstract

    This paper investigates whether banking integration plays an important role in transmitting financial shocks across geographical boundaries by using a dataset on the branch network of nationwide city banks and prefecture-level dataset on the formation and collapse of the real estate bubble in Japan. The results show that the credit and economic cycle of financially integrated prefectures exhibits higher sensitivity to fluctuation in land prices in cities relative to financially isolated ones. These results suggest nationwide banks can be a source of economic volatility when they pass on the impacts of financial shocks to host economies. (JEL E44, G21, R30)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.1.155
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    File URL: http://www.aeaweb.org/aej/mac/data/2009-0092_data.zip
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    File URL: http://www.aeaweb.org/aej/mac/app/2009-0092_app.pdf
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

    Volume (Year): 3 (2011)
    Issue (Month): 1 (January)
    Pages: 155-83

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    Handle: RePEc:aea:aejmac:v:3:y:2011:i:1:p:155-83

    Note: DOI: 10.1257/mac.3.1.155
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    1. Adam B. Ashcraft, 2001. "New evidence on the lending channel," Staff Reports 136, Federal Reserve Bank of New York.
    2. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2000. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," NBER Working Papers 7831, National Bureau of Economic Research, Inc.
    3. Adam B. Ashcraft, 2003. "Are banks really special? New evidence from the FDIC-induced failure of healthy banks," Staff Reports 176, Federal Reserve Bank of New York.
    4. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
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    Cited by:
    1. Ralph De Haas & Neeltje Van Horen, 2011. "Running for the exit: international banks and crisis transmission," Working Papers 124, European Bank for Reconstruction and Development, Office of the Chief Economist.
    2. Panetti, Ettore, 2011. "Financial liberalization and contagion with unobservable savings," MPRA Paper 29540, University Library of Munich, Germany.
    3. Mathias HOFFMANN & OKUBO Toshihiro, 2012. "By a Silken Thread: Regional banking integration and pathways to financial development in Japan's Great Recession," Discussion papers 12026, Research Institute of Economy, Trade and Industry (RIETI).
    4. Manuel Adelino & Song Ma & David T. Robinson, 2014. "Firm Age, Investment Opportunities, and Job Creation," NBER Working Papers 19845, National Bureau of Economic Research, Inc.
    5. Galina Hale & Christopher Candelaria & Julian Caballero & Sergey Borisov, 2013. "Bank linkages and international trade," Working Paper Series 2013-14, Federal Reserve Bank of San Francisco.

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