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 firms’ investment. We do this by developing a new methodology to separate firm-borrowing shocks from bank 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, bank supply shocks—i.e., movements in the supply of bank loans net of borrower characteristics and general credit conditions—can have large impacts on aggregate loan supply and investment. We show that these bank supply shocks explain 40 percent of aggregate loan and investment fluctuations.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18890.
Date of creation: Mar 2013
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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," Staff Reports 604, Federal Reserve Bank of New York.
- 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
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-23 (All new papers)
- NEP-BAN-2013-03-23 (Banking)
- NEP-MAC-2013-03-23 (Macroeconomics)
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- 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.
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