On the Real Effects of Bank Bailout: Micro-Evidence from Japan
American Economic Journal: Macroeconomics, Forthcoming
Posted: 29 Jul 2012
Date Written: July 29, 2012
Exploiting the Japanese banking crisis of the 1990s as a laboratory, we investigate the effects of bank bailouts on the supply of credit and the performance of banks’ clients. Our findings indicate that the size of capital injections relative to banks’ initial financial conditions is crucial for the success of bank bailouts. Capital injections that are large enough to reestablish bank capital requirements increase the supply of credit and spur investment. In contrast, not only do capital injections that are too small fail to increase the supply of credit, but they also encourage the evergreening of non-performing loans.
Keywords: Banking crises, bank bailouts
JEL Classification: G21, G34
Suggested Citation: Suggested Citation