Intensified lending competition and search-for-yield under prolonged monetary easing

Research output: Contribution to journalArticle

Abstract

We present a structural estimation of regionally heterogeneous demand elasticity and the degree of competition in Japanese local loan markets under prolonged monetary easing. Our estimates show that lending competition intensifies in markets where banks hold more slack liquidity caused by monetary easing, and where loan demand is less elastic against lowering interest rates due to a rapidly aging population. We also find evidence for “search-for-yield”, i.e., banks in more competitive markets are driven to extend riskier loans.

Original languageEnglish
Article number101076
JournalJournal of The Japanese and International Economies
Volume56
DOIs
Publication statusPublished - 2020 Jun

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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