2001 Fiscal Year Final Research Report Summary

Comparison between Japanese banking crisis and Asian currency crisis

Research Project

Project/Area Number	12630108
Research Category	Grant-in-Aid for Scientific Research (C)
Allocation Type	Single-year Grants
Section	一般
Research Field	Public finance/Monetary economics
Research Institution	Nagoya City University
Principal Investigator	SAKURAGAWA Masaya Nagoya City University, Dept. of Economics, Associate Professor, 経済学部, 助教授 (90244574)
Project Period (FY)	2000 – 2001
Keywords	Financial Crisis / Depreciation in asset prices / Collapse of asset bubbles / Asian currency crisis
Research Abstract	I study the theoretical mechanism behind the instability of the financial system by comparing between two financial crises, the crash of bubbles in Japan and Asian currency crisis. By extending the theory of bank run to allow for the endogenous change in the real estate price, I develop a framework where the interaction between the credit market and the asset market leads to bank failure I examine either liberalization or regulation will tend to lead to bank failure. I analyze the interaction between economic growth and the behavior of land prices in a credit-constrained economy where land serves not only as a factor of production but as collateral for loans. In "Bank's capital structure under Non-diversifiable risk", I study the design of the bank's capital structure when the bank can not diversify away credit risk due to the macroeconomic risk. I showed that the bank has an incentive to raise own capital in the presence of the macroeconomic risk.

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