Bank Integration and Transmission of Financial Shocks: Evidence from Japan

Imai, Masami; Takarabe, Seitaro

doi:10.1257/mac.3.1.155

Cited by 32 publications

(25 citation statements)

References 37 publications

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“…21 Carlson and Mitchener (2009) have argued that banks, which were allowed to open branches, were more stable during the Great Depression. On the other hand, the results of Imai and Takarabe (2011) for Japan actually emphasize the negative effects of branching as local shocks get propagated throughout the banking network. level in column 4 of Table 4 highlighting the potentially important role played by the extensive margin of plant exit and entry.…”

Section: B Effects On Labormentioning

confidence: 93%

Identifying the Effects of Bank Failures from a Natural Experiment in Mississippi during the Great Depression

Ziebarth

2013

American Economic Journal: Macroeconomics

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I examine the causal effect of bank failures during the Great Depression using the quasi-experimental setup of Richardson and Troost (2009). The experiment is based on Mississippi being divided into two Federal Reserve districts, which followed different policies for liquidity provision. This translated into variation in bank failures across the state. Employing a plant-level sample from the Census of Manufactures, I find that banking failures had a negative effect on revenue stemming from a fall in physical output. I find no effect on employment at the plant-level and a large decline at the county-level. (JEL E32, E44, G21, G33, N12, N22, N92) B anking crises are often associated with declines in the aggregate economy, but how much do bank failures exacerbate these downturns? And at what cost can policy mitigate these deleterious effects? These questions are starkest in the context of the Great Depression where an unprecedented decline in output was paired with an unprecedented collapse in the banking sector and serious questions about policy choices. The problem in addressing this question during the Depression, or at any other point in time, is one of endogeneity. Did bank failures drive business failures or the reverse, with business failures leading to bank insolvencies? Furthermore, in order to formulate an appropriate policy response, if bank failures do lead to declines in economic activity, what is the mechanism?While Keynes and other authors writing around the time of the Depression believed the arrow of causality ran from banks to firms, this was downplayed by future generations of economists who saw the banking crisis during the Depression as a sideshow. The seminal work by Friedman and Schwartz (1971) reinvigorated the old banking-led hypothesis and simultaneously indicted policymakers for their

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Section: B Effects On Labormentioning

confidence: 93%

Identifying the Effects of Bank Failures from a Natural Experiment in Mississippi during the Great Depression

Ziebarth

2013

American Economic Journal: Macroeconomics

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“…In addition to that, my paper is also related to the literature that rationalizes international transmission of financial shocks through interbank channels, like in Allen and Gale (2000) or Brusco and Castiglionesi (2007). The importance of such approach has been further strengthened by recent empirical analysis of default and contagion in networks of banks (Iyer and Peydró, 2010;Imai and Takarabe, 2011).…”

Section: Introductionmentioning

confidence: 94%

Financial liberalization and contagion with unobservable savings

Panetti

2014

International Review of Financial Analysis

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How do market-based channels for the provision of liquidity affect financial liberalization and contagion? In order to answer this question, I extend the Diamond and Dybvig (1983) model of financial intermediation to a two-country environment with unobservable markets for borrowing and lending and comparative advantages in the investment technologies. I demonstrate that the role of hidden markets crucially depends on the level of financial integration of the economy. Despite always imposing a burden on intermediaries, unobservable markets allow agents to partially enjoy gains from financial integration when interbank markets are autarkic. In fully liberalized systems such effect instead disappears. Similarly, in autarky the distortion created by hidden markets improve the resilience of the system to unexpected liquidity shocks.With fully integrated interbank markets, such effect again disappears, as unexpected liquidity shocks always lead to bankruptcy and contagion.

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“…Keeton () finds that in metro areas that were hard hit by the recession of 2000–01, small‐business lending fell more at single‐market banks than multimarket banks, which is consistent with a support effect and thus indirect evidence of a spillover effect. Imai and Takarabe () show that Japanese banks based in cities with sharply declining land prices reduced lending in their nonurban markets. This result implies that declines in urban land prices acted mainly as loan supply shocks, causing city banks to spread the decline in lending to nonmetro markets rather than substitute lending in nonmetro markets for lending in metro markets .…”

Section: Related Literaturementioning

confidence: 99%

The Cross‐Market Spillover of Economic Shocks through Multimarket Banks

Berrospide¹,

Black²,

Keeton³

2016

J of Money Credit Banking

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This study investigates the mortgage lending of banks operating in multiple U.S. metropolitan areas during the housing market collapse of 2007–09. We show that multimarket banks reduced local portfolio lending in response to high overall mortgage delinquencies in their other markets, consistent with the view that local economic shocks can be transmitted to other regions through banks’ internal capital markets. This spillover was greatest when the bank lacked a branch presence and when the market was highly peripheral to the bank in terms of its total mortgage lending. These effects were not fully offset by securitization or other portfolio lenders.

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Bank Integration and Transmission of Financial Shocks: Evidence from Japan

Cited by 32 publications

References 37 publications

Identifying the Effects of Bank Failures from a Natural Experiment in Mississippi during the Great Depression

Identifying the Effects of Bank Failures from a Natural Experiment in Mississippi during the Great Depression

Financial liberalization and contagion with unobservable savings

The Cross‐Market Spillover of Economic Shocks through Multimarket Banks

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