Heterogeneous bank loan responses to monetary policy and bank capital shocks: a VAR analysis based on Japanese disaggregated data
AbstractIn this paper, we study bank loan responses to monetary policy and bank capital shocks using Japan’s disaggregated data sorted by borrower firms’ size and industry. Employing a block recursive VAR, we demonstrate that bank loan responses exhibit large sectoral heterogeneity. Among a broad range of indicators about borrower firms’ characteristics, the heterogeneity is tightly linked to borrower firms’ liability conditions. Firms with a lower capital ratio tend to experience larger drops in bank loans following a contractionary monetary policy shock and/or a negative bank capital shock. In addition, we find that firms’ substitution motive from alternative financial measures also explains the heterogeneity, while the firms’ inventory motive that is stressed in the empirical literature for U.S. banks does not. Our results indicate the importance of considering a compositional shift of bank loans across borrower firms in implementing accommodative monetary policy and capital injection policy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 149.
Date of creation: 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-15 (All new papers)
- NEP-BAN-2013-07-15 (Banking)
- NEP-CBA-2013-07-15 (Central Banking)
- NEP-MON-2013-07-15 (Monetary Economics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).
If references are entirely missing, you can add them using this form.