This paper examines the herd behavior of regional banks during financial fluctuations using loan data on Japanese banks from the 1980s to the 1990s. We use the herding measure developed by Lakonishok, Shleifer, and Vishny (1992) and Uchida and Nakagawa (2007) to detect evidence of herding and...

This paper investigates the learnability of an equilibrium where agents formulate their forecasts under adaptive learning with heterogeneously misspecified econometric models; the equilibrium is called a Heterogeneous Misspecification Equilibrium (HME). The paper finds that the learnability...

Why is the rational expectations equilibrium locally indeterminate if the central bank raises the nominal interest rate too actively in response to a rise in expected inflation? This is because although the bank succeeds in stabilizing the expectations of the future economy, it allows the...

Current theoretical and empirical research suggests that small banks have a comparative advantage in processing soft information and delivering relationship lending. The most comprehensive analysis of this view found using U.S. data that smaller SMEs borrow from smaller banks and smaller banks...