Determinants of international credit allocation: An analysis of US lending by Japanese banks, 1988 to 1994

The central issues addressed are the extent and causes of interdependency between Japanese banks' domestic and US lending. We examine hypotheses that domestic and US credit allocations by Japanese banks during the late 1980s and early 1990s are related through their mutual dependence on capital availability, and that the unique information role of banks as financial intermediaries leads to complementarity between their domestic and international lending. Both hypotheses receive support. Related conclusions are that economic and regulatory conditions in Japan strongly influence the extent of Japanese banks' US lending.