The underlying causes of sharp declines in bank lending during recessions in large developed economies, as exemplified by the U.S. in the early 1990s and Japan in the late 1990s, are still being debated due to a lack of any convincing identification strategy of the supply side capital-lending...

Using the data of individual loan contracts extended by the government owned Japan Finance Corporation for Small and Medium Enterprise (JASME), we examine whether the JASME's lending from December 1997 thorough March 1999 mitigated the credit crunch. We find that on average the JASME offset more...

Using the contract level data, we find that the lending by a Japanese state owned lending institution during the period of the credit crunch mitigated a firm's loss of borrowing from its main bank. We further find that the state owned institution's lending instrumented by the main bank's lending...