IDEAS home Printed from
   My bibliography  Save this paper

Heterogeneous bank loan responses to monetary policy and bank capital shocks: a VAR analysis based on Japanese disaggregated data


  • Naohisa Hirakata
  • Yoshihiko Hogen
  • Nao Sudo
  • Kozo Ueda


In this paper, we study bank loan responses to monetary policy and bank capital shocks using Japan’s disaggregated data sorted by borrower firms’ size and industry. Employing a block recursive VAR, we demonstrate that bank loan responses exhibit large sectoral heterogeneity. Among a broad range of indicators about borrower firms’ characteristics, the heterogeneity is tightly linked to borrower firms’ liability conditions. Firms with a lower capital ratio tend to experience larger drops in bank loans following a contractionary monetary policy shock and/or a negative bank capital shock. In addition, we find that firms’ substitution motive from alternative financial measures also explains the heterogeneity, while the firms’ inventory motive that is stressed in the empirical literature for U.S. banks does not. Our results indicate the importance of considering a compositional shift of bank loans across borrower firms in implementing accommodative monetary policy and capital injection policy.

Suggested Citation

  • Naohisa Hirakata & Yoshihiko Hogen & Nao Sudo & Kozo Ueda, 2013. "Heterogeneous bank loan responses to monetary policy and bank capital shocks: a VAR analysis based on Japanese disaggregated data," Globalization and Monetary Policy Institute Working Paper 149, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:149

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Naknoi, Kanda, 2008. "Real exchange rate fluctuations, endogenous tradability and exchange rate regimes," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 645-663, April.
    2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    3. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 865-915.
    4. Liu, Zheng & Pappa, Evi, 2005. "Gains from coordination in a multi-sector open economy : does it pay to be different?," LSE Research Online Documents on Economics 525, London School of Economics and Political Science, LSE Library.
    5. Schlagenhauf, Don E. & Wrase, Jeffrey M., 1995. "Liquidity and real activity in a simple open economy model," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 431-461, June.
    6. David Arseneau, 2007. "The Inflation Tax in an Open Economy with Imperfect Competition," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 126-147, January.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Rohit Gupta, 2016. "Understanding the Response of Indian Banks to Macroeconomic Shocks: A Strategy Perspective," Working Papers id:9949, eSocialSciences.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:feddgw:149. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Chapman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.