This repository contains the data set and replication files for the paper By a Silken Thread: regional banking integration and credit reallocation during Japan’s lost decade (doi.org/10.1016/j.jinteco.2022.103579) published in the Journal of International Economics. ABSTRACT: Regional banking integration allows credit to be reallocated to regions with high credit demand. Using the natural experiment of Japan's lost decade, we show that this reallocation channel mitigated the real effects from the bank liquidity shock in prefectures with many bank-dependent small firms. We propose an instrument for modern-day regional banking integration that exploits the fact that regional segmentation of banking markets in Japan goes back to the institutions set up for silk export finance in the late 19th century. We illustrate how the difference between the OLS and IV estimates can provide information about unobserved cross-regional heterogeneity in bank-firm matches when only aggregate regional data is available. Our results highlight that well-integrated banking markets are important and complementary to bond markets in limiting macroeconomic asymmetries in a monetary union, in particular during major financial crises.

This repo is a copy of the files deposited on the Zurich Open Research Archive (ZORA) under https://doi.org/10.5167/uzh-69211 Since ZORA is mainly a repo for last author versions of papers and data sets and code are hard to maintain there, the aim of this zenodo repo is to ensure easy maintenance of the replication files of this project in the future.