Incentives to Issue Low-Quality Securitized Products in the OTD Business Model. IMES Discussion Paper Series Discussion Paper No. 2009-E-26

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We consider an economy in which a lender finances loans to borrowers by issuing a securitized product to investors and in which the credit quality of the product can depend on whether the lender screens borrowers. In the presence of asymmetric information between the lender and investors regarding the credit quality of potential borrowers, overvaluation from the lender's perspective can occur for low-quality

A Financial System Perspective on Japan’s Experience in the Late 1980s. IMES Discussion paper Series Discussion Paper No. 2009-E-19

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This paper revisits the events of the 1980s bubble in Japan in light of the lessons learned from the subprime crisis in the United States. Our focus is on the role played by sectoral developments in the financial system in Japan. We highlight the transformation of a subset of non-financial firms (the large manufacturing firms) from being net debtors to the banks to becoming net creditors to the banks, thereby becoming part of the financial intermediary sector. In this way, large manufacturing firms in Japan played the role of surrogate wholesale banks that increased the overall supply of credit to the economy. When good borrowers already had credit and yet loose monetary conditions encouraged greater credit supply, credit availability to marginal borrowers and to real estate-related sectors increased. We discuss the role of market conditions and monetary policy in this development. Keywords: Balance sheet; Commitment; Credit supply; Financial liberalization;

Restructuring in a Recession. ACCJ Journal June 2009

Tacit Knowledge and Knowledge Conversion: Controversy and Advancement in Organizational Knowledge Creation Theory. Organization Science May-June 2009 Vol. 20, No. 3

Yen Carry Trade and the Subprime Crisis. IMF staff papers 2009 Vol56 No.2 pp.384-409

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Yen carry trades have traditionally been viewed in narrow terms purely as a foreign exchange transaction. This paper argues that the carry trade should instead be viewed in the broader context of global credit conditions. We show that the volume of yen funding that is channeled for use outside Japan is mirrored by fluctuations in the size of U.S. broker-dealer balance sheets. Differences in short-term interest rates across currencies help to explain the incidence of the carry trade, as does the measure of implied equity risk given by the VIX index. The conjunction of deteriorating credit conditions in the United States and the weakness of the dollar against the yen in the early stages of the credit crisis of 2007-08 can thus be seen as two sides of the same coin. Both can be seen as consequences of financial sector deleveraging in the United States.