Planning and Services White Papers
Firm Investment and Balance-Sheet Problems in Japan
Overview This paper investigates whether balance-sheet conditions of firms and their main banks matter for firm investment behavior using dynamic corporate panel data in Japan for the period 1985-95. It finds that smaller non-bond issuing firms were facing liquidity constraints; these firms balance-sheet conditions (the debt asset ratios) affected their investment from the midst of the bubble era by influencing mail banks lending to them; and the deterioration of their main banks balance sheet conditions constrained these firms investment from about 1993. These findings highlight the potential macroeconomic impact and importance of the credit channel of monetary policy, and support the case of a credit crunch facing small Japanese firms during this period.
| Publisher | International Monetary Fund | File Format | PDF, requires Acrobat Rdr 5 |
|---|---|---|---|
| Date Published | August 1999 | Downloads | 38 |
| Format | White Papers | ||
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