The Effects of Monetary Policy on Firm Investment after the Collapse of the Asset Price Bubble: An Investigation Using Japanese Micro Data

Takashi Nagahata and Toshitaka Sekine
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Takashi Nagahata: Bank of Japan

Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper investigates what can be learned about the effects of monetary policy on firm investment after the collapse of the asset price bubble in Japan. By estimating firm investment functions based on corporate panel data, the paper reveals that the monetary easing after the bubble burst worked through the interest rate channel, but not through the credit channel---the credit channel was blocked because of a deterioration in balance-sheet conditions. The paper finds that this deterioration in balance-sheet conditions, especially in bank balance-sheet conditions, hampered investment by smaller non-bond-issuing firms more severely than that by larger bond-issuing firms.

Keywords: investment; monetary transmission channels; user cost of capital (search for similar items in EconPapers)
JEL-codes: E22 E50 (search for similar items in EconPapers)
Date: 2002-07
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Citations: View citations in EconPapers (14)

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