DEFLATION AND INVESTMENT ACTIVITIES OF BANKS. THE CASE OF JAPAN IN THE YEARS 1993–2008

Waldemar Koziol
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Waldemar Koziol: University of Warsaw

Equilibrium. Quarterly Journal of Economics and Economic Policy, 2010, vol. 4, issue 1, 191-201

Abstract: The purpose of the article is to identify determinants of investment activities of banks during deflationary process. Japanese experience suggests that the processes of long-term deflation have a substantial impact on the structure of assets and liabilities of banking institutions. In conditions of deflation and 'liquidity trap', classic, deposit-credit activities of banks do not produce adequate profits. As a result it influences negatively bank’s profitability. In this situation banks tend to look for other sources of revenue such as commissions and investment activities. Article shows causes and effects of changes in banks' balance sheets. It is also an attempt to answer the question whether there are possibilities to build an investment portfolio that help to avoid the negative effects of deflation processes.

Keywords: deflation; debt-deflation; bank investment portfolio (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pes:ierequ:v:4:y:2010:i:1:p:191-201

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