DID MONEY OR LOANS PLAY A MORE IMPORTANT ROLE IN THE SHOWA DEPRESSION?(in Japanese)

Much research has concluded that deteriorated banking sector had an adverse affect on the Great Depression. In Japan it is also pointed out that the bankruptcy of banks seriously affected the Japanese economy during the Showa Depression, but only few empirical studies have been made on this important subject. This paper estimates the effects of money and loans on production by using a vector auto regression model and a vector error correction model. The model is estimated by using monthly data from 1922-36. The estimation results show that money and price significantly affect production, but that the effect of loans is strictly limited. The argument that the banking sector is important is based on the hypothesis that banks have special information on firms, and that the function of banks cannot be substitutable by other fund procurement methods (shares, securities, and trade credits). The results-that the effect of loans is negligible-however, suggest that the hypothesis might not be right. The function of banks emphasized here is information production function; it is neither a settlement function nor a function of reserving wealth. This study suggests that protecting deposits is probably important, but that recovering the information production function of the banking sector is not.