How Much do Idiosyncratic Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data

Mary Amiti and David Weinstein

No 18890, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that supply-side financial shocks have a large impact on firms' investment. We develop a new methodology to separate firm-borrowing shocks from bank-supply shocks using a vast sample of matched bank-firm lending data. We decompose aggregate loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of financial institution concentration means that individual banks are large relative to the size of the economy, which creates a role for granular shocks as in Gabaix (2011). We show that idiosyncratic granular bank-supply shocks explain 30-40 percent of aggregate loan and investment fluctuations.

JEL-codes: E44 G21 G31 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-ban and nep-mac
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Published as Mary Amiti and David E. Weinstein, "How Much Do Idiosyncratic Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data," Journal of Political Economy 0, no. 0 (-Not available-): 000.

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