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Identifier to cite or link to this item: https://hdl.handle.net/10086/28884

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Title
Investment Distortion by Collateral Requirement: Evidence from Japanese SMEs
Creator
Creator Name
Ogura, Yoshiaki Ogura, Yoshiaki
Affiliation
Affiliation Name
Waseda University
Key Word
collateral constraint
investment
small and medium-sized enterprises
real estate price
loan-to-value ratio
JEL
E22
G31
R30
Abstract
We examine the significance of the distortionary effect of the collateral requirement to investments in assets pledgeable for collateral by small and medium-sized enterprises (SMEs). The theory predicts that the binding collateral constraint causes over-investment if the price of pledgeable assets is expected to go up steeply while it causes under-investment otherwise. Our structural estimation of the Euler equation under a collateral constraint using the dataset on Japanese SMEs in the 1980s and 1990s shows that the collateral constraint is binding when the price of a pledgeable asset is declining, whereas it is not when the price is increasing. This finding indicates that the binding collateral constraint causes mainly the problem of under-investment for many SMEs in a recession and casts doubt on the welfare effect of the loan-to-value (LTV) ratio cap as a macroprudence policy.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2017-11
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
HIT-REFINED Working Paper Series ; No. 73
Relation
Related Identifier
URI
  http://www.ier.hit-u.ac.jp/hit-refined/
Number of Pages
40
Sponsorship
基盤研究(S) = Grants-in-Aid for Scientific Research (S)
Appears in Collections
Working Paper Series / Real Estate Markets, Financial Crisis, and Economic Growth An Integrated Economic Approach
URL
https://hdl.handle.net/10086/28884