Prudential regulation and the "credit crunch": Evidence from Japan

Wako Watanabe

Research output: Contribution to journalArticlepeer-review

63 Citations (Scopus)


The underlying causes of sharp declines in bank lending during recessions in large developed economies, as exemplified by the U.S. in the early 1990s and Japan in the late 1990s, are still being debated due to the lack of any convincing identification strategy of the supply side capital-lending relationship from lending demand. Using within bank share of real estate lending in the late 1980s as an instrumental variable for bank capital, we find that Japanese banks cut back on their lending in response to a large loss of bank capital in fiscal year 1997.

Original languageEnglish
Pages (from-to)639-665
Number of pages27
JournalJournal of Money, Credit and Banking
Issue number2-3
Publication statusPublished - 2007 Mar
Externally publishedYes


  • Capital crunch
  • Credit crunch
  • Instrumental variable
  • Prudential regulation

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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