Peek and Rosengren (American Economic Review 2005; 95) suggested the mechanism of ``unnatural selection,'' where low-capitalized Japanese banks increase credit to low-quality firms because of their motivation to pursue balance sheet cosmetics. In this study, we replicate their estimation results,...

Using firm-level data on the Japanese manufacturing industry, this paper studies the causal impact of uncertainty on the dynamic relation between corporate investment and financing conditions. It demonstrates that the cautionary effect that makes actual corporate investment decisions indifferent...

We examine the reason why two opposing views on distressed banks' lending behavior in Japan's postbubble period have coexisted: one is stagnant lending in a capital crunch and the other is forbearance lending to low-quality borrowers. To this end, we address the measurement problem for bank...

This paper investigates an existence of the bank lending channel during the quantitative monetary easing policy (QMEP) period, using panel data of Japanese banks' balance sheets. We find that growth rates of lending of smaller banks and healthier banks responded well to the QMEP. We also find...