The International Transmission of Financial Shocks: The Case of Japan
American Economic Review, Vol 87, No 4, September 1997
37 Pages Posted: 3 Jun 1997
Date Written: September 1996
The large size of Japanese bank lending operations in the United States enables us to use U.S. banking data to investigate the extent to which the sharp decline in Japanese stock prices was transmitted to the United States via U.S. branches of Japanese parent banks, as well as to identify a supply shock to U.S. bank lending that is independent of U.S. loan demand. We find that binding risk-based capital requirements associated with the decline in the Japanese stock market resulted in a decline in commercial lending by Japanese banks in the United States that was both economically and statistically significant.
JEL Classification: G21, F34, E44
Suggested Citation: Suggested Citation