Kris James Mitchener (Assistant Department of Economics, Santa Clara University (E-mail:kmitchener@scu.edu)) nd Mari Ohnuki (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: mari.oonuki@boj.or.jp))
Abstract
We construct new quarterly estimates of lending rates for 47 Japanese prefectures for the period 1886-1922, and test the extent to which regional capital markets integrated during this period. We analyze whether the capital market was efficient, estimate the speed of convergence among the rates, and assess the degree to which different regions were integrated with the main financial centers of Japan. Interest-rate differentials between the financial centers of Japan and other regions do not follow a random walk, and hence are suggestive of market efficiency ? in the sense that arbitrage opportunities did not persist. Results from cointegration tests suggest that the integration in Japan is characterized by multiple stochastic elements. We find the existence of four long-run cointegrating relationships. We also find evidence that shocks occurring in a financial center, such as the Kanto region, were transmitted to outlying regions and had permanent, but small effects on their rates.
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Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number
07-E-17.
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Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
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[Downloadable!]
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