TY - JOUR
T1 - Intensified lending competition and search-for-yield under prolonged monetary easing
AU - Ogura, Yoshiaki
N1 - Funding Information:
The previous version of this article has been circulated under the title “Search-for-Yield under Prolonged Monetary Easing and Aging” (TCER Working Paper E-142). I thank Takeo Hoshi, Masami Imai, Kiyotaka Nakashima, Hirofumi Uchida, Ichiro Uchida, Ying Xu, and other participants at the seminar or sessions at Kwansei Gakuin University, the 11th Regional Finance Conference in Kushiro in 2017, the 28th NBER-TCER-CEPR Torio Conference in Tokyo in 2019, and the 2019 Fall Meeting of the Japan Society of Monetary Economics in Kobe for insightful comments. I also thank the anonymous referee of this journal for the insightful comments. This study was financially supported by KAKENHI grant 17K03818.
Publisher Copyright:
© 2020 Elsevier Inc.
PY - 2020/6
Y1 - 2020/6
N2 - 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.
AB - 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.
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U2 - 10.1016/j.jjie.2020.101076
DO - 10.1016/j.jjie.2020.101076
M3 - Article
AN - SCOPUS:85082198914
SN - 0889-1583
VL - 56
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
M1 - 101076
ER -