How much do bank shocks affect investment? Evidence from matched bank-firm loan data
AbstractWe show that supply-side financial shocks have a large impact on the investment decisions of firms. We do this by developing a new methodology to separate firms' credit shocks from loan supply shocks, using a vast sample of matched bank-firm lending data. We decompose loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of financial institution concentration means that individual banks are large relative to the size of the economy, which creates a role for granular shocks, as in Gabaix (2011). As a result, idiosyncratic bank shocks--movements in bank loan supply net of borrower characteristics and general credit conditions--can have large impacts on aggregate loan supply and investment. We show that these idiosyncratic bank shocks explain 40 percent of aggregate loan and investment fluctuations.
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 New York in its series Staff Reports with number 604.
Date of creation: 2013
Date of revision:
Other versions of this item:
- Amiti, Mary & Weinstein, David E., 2013. "How Much do Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data," CEPR Discussion Papers 9400, C.E.P.R. Discussion Papers.
- Mary Amiti & David E. Weinstein, 2013. "How Much do Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data," NBER Working Papers 18890, National Bureau of Economic Research, Inc.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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.:
- Tobias Adrian & Paolo Colla & Hyun Song Shin, 2012. "Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007-9," NBER Working Papers 18335, National Bureau of Economic Research, Inc.
- Matías Braun & Borja Larrain, 2005.
"Finance and the Business Cycle: International, Inter-Industry Evidence,"
Journal of Finance,
American Finance Association, vol. 60(3), pages 1097-1128, 06.
- Matias Braun & Borja Larrain, 2004. "Finance and the Business Cycle: International, Inter-industry Evidence," Finance 0403001, EconWPA.
- Xavier Gabaix, 2005.
"The Granular Origins of Aggregate Fluctuations,"
2005 Meeting Papers
470, Society for Economic Dynamics.
- Claudia M. Buch & Katja Neugebauer, 2010.
"Bank-Specific Shocks and the Real Economy,"
Working Paper / FINESS
2.3, DIW Berlin, German Institute for Economic Research.
- Montgomery, Heather & Shimizutani, Satoshi, 2009. "The effectiveness of bank recapitalization policies in Japan," Japan and the World Economy, Elsevier, vol. 21(1), pages 1-25, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber).
If references are entirely missing, you can add them using this form.