Asset Bubbles, Monetary Policy and Bank Lending in Japan: An Empirical Investigation

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Asset Bubbles, Monetary Policy and Bank Lending in Japan: An Empirical Investigation

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Basile, Amy
Joyce, Joseph P

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Joseph P. Joyce

Abstract

Asset prices rose rapidly in Japan during the latter half of the 1980s, and then declined as quickly in the early 1990s. Their behaviour is consistent with the existence of speculative "bubbles" in these markets. This paper investigates the dynamic relationships among stock and land prices in Japan, output, and monetary and bank lending variables. The results of causality tests and variance decompositions are reported for two time periods, 1972-85 and 1986-91. The price bubbles affected each other in the first period, although the size of this impact is dependent on the choice of variables in the VARs. In the bubble period, there is strong evidence that the stock market bubble was determined by its own past and also influenced the land market bubble, accounting for a significant proportion of the variance of the land market bubble. However, neither output, the money supply nor the lending variables were significant in the causality tests or in explaining the variation of the two asset bubbles. Copyright 2001 by Taylor and Francis Group

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Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 33 (2001)
Issue (Month): 13 (October)
Pages: 1737-44
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Handle: RePEc:taf:applec:v:33:y:2001:i:13:p:1737-44

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Renée Fry, 2004. "International demand and liquidity shocks in a SVAR model of the Australian economy," Applied Economics, Taylor and Francis Journals, vol. 36(8), pages 849-863, May. [Downloadable!] (restricted)
Monzur Hossain, 2005. "Can Japan avert any future banking crisis?," Applied Economics Letters, Taylor and Francis Journals, vol. 12(7), pages 425-429, June. [Downloadable!] (restricted)
Qin Xiao & Randolph Gee Kwang Tan, 2006. "Signal Extraction with Kalman Filter: A Study of the Hong Kong Property Price Bubbles," Economic Growth centre Working Paper Series 0601, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre. [Downloadable!]

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