This paper investigates (i) what has determined the land investment behavior of Japanese firms since the latter half of the 1980s; and (ii) how the current market prices of their land assets diverge from their shadow prices (marginal values of land investment). To do so, we estimate nonlinear land investment functions using micro panel corporate data, and calculate the partial q for land assets taking account of their collateral role. The land investment functions reveal that firms, in particular those in the real estate related industries, have been net sellers of land in the 1990s, mainly in response to the decline in sales and the deterioration in financial conditions after the bursting of the bubble. Moreover, manufacturing firms have also sold land because of the hike in the overseas production ratio. Partial q shows that the market price of land held by the real estate related industries has exceeded its shadow price since the latter half of the 1980s. For other industries, market land prices declined to the level of their shadow prices around the middle of the 1990s. However, since then market prices have once again found themselves above their shadow prices, in the face of pessimistic expectations revealed by distressed share prices after 1997.
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Kiyotaki, Nobuhiro & Moore, John, 1997.
"Credit Cycles,"
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 211-48, April.
Other versions:
Nobuhiro Kiyotaki & John Moore, 1995.
"Credit Cycles,"
NBER Working Papers
5083, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
John Moore & Nobuhiro Kiyotaki, .
"Credit Cycles,"
Discussion Papers
1995-5, Edinburgh School of Economics, University of Edinburgh.
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