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Who killed the Japanese money multiplier? A micro-data analysis of banks

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  • Etsuro Shioji

Abstract

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 banks’ financial soundness, and the second is the zero interest rate policy. Using panel data of banks’ 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

Suggested Citation

  • Etsuro Shioji, 2004. "Who killed the Japanese money multiplier? A micro-data analysis of banks," Econometric Society 2004 Far Eastern Meetings 632, Econometric Society.
  • Handle: RePEc:ecm:feam04:632
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    File URL: http://repec.org/esFEAM04/up.28360.1080625469.pdf
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    References listed on IDEAS

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    1. Samet, Dov, 1998. "Common Priors and Separation of Convex Sets," Games and Economic Behavior, Elsevier, vol. 24(1-2), pages 172-174, July.
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    4. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, pages 291-303.
    5. Ng, Man-Chung, 2003. "On the duality between prior beliefs and trading demands," Journal of Economic Theory, Elsevier, vol. 109(1), pages 39-51, March.
    6. Morris, Stephen, 1994. "Trade with Heterogeneous Prior Beliefs and Asymmetric Information," Econometrica, Econometric Society, vol. 62(6), pages 1327-1347, November.
    7. Barton L. Lipman & Sugato Bhattacharyya, 1995. "Ex ante versus interim rationality and the existence of bubbles," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 469-494.
    8. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
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    More about this item

    Keywords

    money multiplier; panel data; banking; bad loans; zero interest rate;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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