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Credit channel of monetary policy in Japan: resolving the supply versus demand puzzle

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  • Tomoya Suzuki
Abstract
The credit view is that a monetary tightening affects the real economy by shifting the supply schedule of bank credit left. While bank credit typically contracts following a monetary tightening, the financial contraction does not necessarily mean a shift of the supply schedule. Testing the credit view requires the identification of the shifts of the demand and supply schedules of credit. Using an original approach, this study shows that the credit view is supported for Japan. The credit view is, however, composed of two different views, namely the lending view and the balance-sheet view. While the balance-sheet view implies that the cutback of lending has no impact on the real economy, the lending view implies independent impacts of the cutback. Given the acceptance of the credit view, this study further attempts to test the balance-sheet view against the lending view.

Suggested Citation

  • Tomoya Suzuki, 2004. "Credit channel of monetary policy in Japan: resolving the supply versus demand puzzle," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2385-2396.
    • Handle: RePEc:taf:applec:v:36:y:2004:i:21:p:2385-2396
    DOI: 10.1080/0003684042000280517
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    Cited by:

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    4. Leonardo Becchetti & Maria Melody Garcia & Giovanni Trovato, 2011. "Credit Rationing and Credit View: Empirical Evidence from an Ethical Bank in Italy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(6), pages 1217-1245, September.
    5. Josef Bajzik & Jan Janku & Simona Malovana & Klara Moravcova & Ngoc Anh Ngo, 2023. "Monetary Policy Has a Long-Lasting Impact on Credit: Evidence from 91 VAR Studies," Working Papers 2023/19, Czech National Bank.
    6. Yu Hsing & Wen-jen Hsieh, 2014. "Test of the Bank Lending Channel for a BRICS Country," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(8), pages 1016-1023, August.
    7. Raul Ibarra, 2016. "How important is the credit channel in the transmission of monetary policy in Mexico?," Applied Economics, Taylor & Francis Journals, vol. 48(36), pages 3462-3484, August.
    8. Uluc Aysun & Ryan Brady & Adam Honig, 2009. "Financial Frictions and Monetary Transmission Strength: A Cross-Country Analysis," Working papers 2009-24, University of Connecticut, Department of Economics, revised Jun 2010.
    9. Daisuke Tsuruta, 2008. "Bank information monopoly and trade credit: do only banks have information about small businesses?," Applied Economics, Taylor & Francis Journals, vol. 40(8), pages 981-996.
    10. Rachid Ouchchikh, 2017. "Monetary Policy Transmission Mechanism in a Small Open Economy under Fixed Exchange Rate: An SVAR Approach for Morocco," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 11(1), pages 42-51, December.
    11. Khaysy Srithilat & Thipphavanh Samatmanivong & Vaiyoth Lienpaserth & Phiengsanith Chanthavixay & Visanu Boundavong & Vonsy Douangty, 2022. "The Effect of Monetary Policy on Economic Growth in Lao PDR," International Journal of Economics and Financial Issues, Econjournals, vol. 12(1), pages 67-74.
    12. Yu Hsing, 2014. "Test of the bank lending channel: the case of US consumer loans," Applied Economics Letters, Taylor & Francis Journals, vol. 21(7), pages 466-469, May.
    13. Burgstaller Johann, 2010. "Bank Lending and Monetary Policy Transmission in Austria," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(2), pages 163-185, April.
    14. Abdurrahman Nazif Çatik & Mehmet Karaçuka, 2012. "The bank lending channel in Turkey: has it changed after the low-inflation regime?," Applied Economics Letters, Taylor & Francis Journals, vol. 19(13), pages 1237-1242, September.
    15. Luis Fernando Colunga Ramos, 2024. "The Loan Puzzle in Mexico," Working Papers 2024-15, Banco de México.
    16. Yu HSING, 2014. "Test of the bank lending channel: The case of Hungary," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(590)), pages 115-120, January.
    17. Jui-Chuan Della Chang, 2013. "Identifying the bank lending channel in a small open economy," Economics Bulletin, AccessEcon, vol. 33(2), pages 1632-1640.
    18. Leonardo Becchetti & Melody Garcia & Giovanni Trovato, 2009. "Credit rationing and credit view: empirical evidence from loan data," CEIS Research Paper 144, Tor Vergata University, CEIS, revised 30 Sep 2009.
    19. Maslov, Alexander, 2011. "Inflationary Handicap Of The Monetary Transmission Mechanism: Evidence From Russia," MPRA Paper 50036, University Library of Munich, Germany, revised 12 Apr 2012.

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