The Economic Impact of Herd Behavior in the Japanese Loan Market

Ryuichi Nakagawa, Hidekazu Oiwa, Fumiko Takeda

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)

Abstract

This paper investigates whether inefficient herd behavior of Japanese financial institutions in the domestic loan market affected the real economy during the period between 1975 and 1999. By using Japanese loan data, arranged by geographical area, we show that loans stemming from inefficient herd behavior of Japanese financial institutions tended to have destabilizing effects on the GDP and land prices in the following years, while ordinary loans of those financial institutions had a more positive impact. Our results indicate that the deterioration of the real economy in the 1990s may have been attributable partly to the inefficient herd behavior in the Japanese loan market during the period of the economic bubble in the late 1980s.

Original languageEnglish
Pages (from-to)600-613
Number of pages14
JournalPacific Basin Finance Journal
Volume20
Issue number4
DOIs
Publication statusPublished - 2012 Sep
Externally publishedYes

Keywords

  • Economic bubble
  • Financial institutions
  • Herd behavior
  • Loan market

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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