New paper in Financial History Review
Our paper “Branch banking and regional financial markets: evidence from prewar Japan” with Okubo Toshihiro (Keio University) and Okazaki Tetsuji (Meiji Gakuin University)is now published as open access article in the Financial History Review.
In the paper we examine how the expansion of branch banking in peripheral Japanese prefectures in the interwar period helped integrate financial markets during this formative period in which the structure of modern Japan’s banking market was shaped. Through their branch networks, large, urban banks from the major centers (mainly Tokyo, Osaka) did not primarily compete with incumbent local banks in their respective local lending markets. Rather, urban banks exported deposits from low-growth peripheral areas to high-growth prefectures in the center. This bid up deposit rates for incumbent local banks, forcing these to tighten their lending standards to traditional industries. Our results highlight how competition for funds enables an ultimately efficient reallocation of capital while preserving a functionally separated banking system in which local banks engage in relationship based lending to small firms while larger banks lend to larger firms countrywide.
Mathias Hoffmann is Professor at the Department of Economics at the University of Zurich. His research focuses on the macroeconomic aspects of international financial integration and on the link between financial markets and the macro-economy more generally. His recent published articles include papers on the determinants of international capital flows and imbalances, the international transmission of business cycles, on international risk sharing, banking regulation, and housing markets. Prior to arriving in Zurich, he was Professor at the University of Dortmund in Germany and a Lecturer at Southampton University (UK). He holds a PhD in Economics from the European University Institute in Florence and obtained his undergraduate education in economics and mathematics at WHU School of Management, Brandeis University and the University of Bonn.
Mathias Hoffmann is affiliated with the University of Zurich’s research priority program in financial regulation (URPPP FinREG), a fellow of CESifo Munich and of the Centre for Applied Macroeconomic Analysis (CAMA) at the Australian National University, and has held visiting positions at the University of California at Berkeley, the Deutsche Bundesbank, the Bank of Finland, the Hong Kong Monetary Authority, the Bank for International Settlements, Norges Bank, Keio University and Stanford University.