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

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  • Ogura, Yoshiaki

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.

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  • Ogura, Yoshiaki, 2020. "Intensified lending competition and search-for-yield under prolonged monetary easing," Journal of the Japanese and International Economies, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:jjieco:v:56:y:2020:i:c:s0889158320300137
    DOI: 10.1016/j.jjie.2020.101076
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    Cited by:

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    2. Shikimi, Masayo, 2023. "Risk-taking and bank competition under a low interest rate environment: Evidence from loan-level data," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    3. Wang, Ling, 2023. "Central bank asset purchases, banks’ risky security holdings and profitability: Macro and micro evidence from Japan and the U.S," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 347-364.
    4. Yue Cai, 2021. "Measuring Market Power in the IPO Underwriter," Working Papers 2108, Waseda University, Faculty of Political Science and Economics.
    5. Basu, Parantap & Wada, Kenji, 2023. "Unconventional monetary policy and the bond market in Japan: A new Keynesian perspective," Japan and the World Economy, Elsevier, vol. 67(C).
    6. Uesugi, Iichiro & Hiraga, Kazuki & Manabe, Masashi & Yoshino, Naoyuki, 2022. "Measuring concentration in the Japanese loan and deposit markets," Japan and the World Economy, Elsevier, vol. 63(C).
    7. Hiroya Tanaka & Keiichi Hori & Akihisa Shibata, 2024. "Search-for-Yield and Home Bias under Quantitative Easing," KIER Working Papers 1106, Kyoto University, Institute of Economic Research.

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    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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