‘By a Silken Thread’: Regional Banking Integration and Pathways to Financial Development in Japan's Great Recession

68 Pages Posted: 26 Jun 2013

See all articles by Mathias Hoffmann

Mathias Hoffmann

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Toshihiro Okubo

Keio University

Date Written: June 2013

Abstract

Regional differences in banking integration determined how Japan’s Great Recession after 1990 spread across the country. We explain these differences with the emergence of silk reeling as the main export industry after Japan’s opening to trade in the 19th century. The silk-exporting prefectures developed a system of export finance centered on local, cooperative banks that preserved their dominant local position long after the decline of the silk industry. Our findings suggest that different pathways to financial development can lead to long-term differences in de facto financial integration, even if there are no formal barriers to capital mobility between regions.

Keywords: financial development, financial integration, Japan, Great Recession, Lost Decade, banking integration, regional business cycles, transmission of financial shocks, misallocation of credit, trade credit, export finance, silk industry

JEL Classification: F15, F30, F40, G01, N15, N25, O16

Suggested Citation

Hoffmann, Mathias and Okubo, Toshihiro, ‘By a Silken Thread’: Regional Banking Integration and Pathways to Financial Development in Japan's Great Recession (June 2013). Available at SSRN: https://ssrn.com/abstract=2285262 or http://dx.doi.org/10.2139/ssrn.2285262

Mathias Hoffmann (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Toshihiro Okubo

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

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