Constructing a strong and unique instrument for bank capital from the empirical observation of Japanese banks' past behavioral changes, we identify the impact of capital adequacy on the allocation of bank lending supply across low quality and high quality borrowers. We find that, in FY 1997, a...

We experimentally explore how investor decision horizons influence the formation of stock prices. We find that in long-horizon sessions, where investors collect dividends till maturity, prices converge to the fundamental levels derived from dividends through backward induction. In short-horizon...

This paper examines a mechanism of liquidity-preference fluctuations caused by changes in people's belief about a random liquidity shock. When observing the shock, they rationally update their belief so that the shock probability is higher; consequently they raise liquidity preference and reduce...

This paper attempts to test the morale theory of nominal wage rigidity by identifying the causal effect of pay cuts on workers' income satisfaction and work morale. This paper uses the current deflationary recession in Japan to estimate this causal effect. Our original survey of Japanese firms...

The main purpose of this paper is to present the empirical findings derived from the data of small firms that the availability of private and public information on the borrowing firm leads to diverse borrowing patterns among firms. Exploring logit models to characterize the firm's choice of a...

This note studies the allocation of heterogeneous commodities to agents whose private values for combinations of these commodities are monotonic by inclusion. This setting can accommodate the presence of complementarity and substitutability among the heterogeneous commodities. By using induction...

We consider situations where a society allocates a finite units of an indivisible good among agents, and each agent receives at most one unit of the good. For example, imagine that a government allocates a fixed number of licences to private firms, or imagine that a government distributes...

This paper attempts to estimate the causal effect of public capital stock on production using Japanese prefectural data. We first articulate the difficulty of consistently estimating the regional-level production function with public capital due to the endogeneity of the public capital stock...

Using data on one-shot games, we investigate the assumption that players respond to underlying expectations about their opponent's behavior. In our laboratory experiments, subjects play a set of 14 two-person 3x3 games, and state first order beliefs about their opponent'sbehavior. The sets of...

In this paper, we conduct a theoretical analysis of the consumption and income taxes from the viewpoints of efficiency and equity, we evaluate the past and present structure of Japan's consumption and income taxes, we consider the role of the consumption tax in stimulating the economy, in...