The dramatic 70 percent decline in Japanese commercial real estate prices from their peak in 1990 provides a natural experiment to test the extent to which a loan supply shock can affect real economic activity. Because the shock was external to U.S. credit markets, yet connected through the...

Even in a world with rational expectations, it has been well established theoretically that if the central bank possesses information superior to that available to the public, there is room for effective and socially beneficial countercyclical monetary policy. This paper tests whether...

A key provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) was prompt corrective action (PCA). PCA emphasized early intervention by bank supervisors and was intended to limit forbearance by making supervisory intervention more timely and less discretionary....

This paper provides evidence that the Federal Reserve has an informational advantage over the public that can be exploited to improve activist monetary policy. The informational advantage derives from the Fed?s role as a bank supervisor, and it is shown to be of sufficient duration to be...

Japanese banks are among the world's largest global financial intermediaries, with a significant presence in many regions, particularly the United States and Southeast Asia. In addition to being among the world's largest banks, they have some of the world's largest problems. Recent studies have...

Evidence of an operative credit channel has been inconclusive. The inability to clearly distinguish the effects of shocks to loan supply from those to loan demand has made it difficult to quantify the importance of this transmission mechanism to the economy. This paper provides an innovative...

One of the more dramatic financial events of the late 1980s and early 1990s was the surge in Japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent. While the unprecedented fluctuations in Japanese stock prices were domestic financial shocks, the...

Banks, particularly in New England, have experienced major losses of capital as a result of their exposure to risky real estate loans. These losses, accompanied by strict enforcement of capital regulations, have caused banks to shrink their assets in an attempt to improve their capital/asset...