Who killed the Japanese money multiplier? A micro-data analysis of banks
This paper investigates causes of the recent sharp decline in the money multiplier in Japan from the bank side. Two candidates for the cause are examined: the first is the worsening of the banksâ€™ financial soundness, and the second is the zero interest rate policy. Using panel data of banksâ€™ balance sheets, it is shown that both can contribute to a decline in the responsiveness of loans to a base money expansion. Quantitatively, the low interest rate is the more important among the two
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