Credit availability and asset price: Empirical analysis of the Japanese bubbles in 1980s

This paper empirically examines whether credit availability affects land price by using Japanese city-level data during the bubble period of 1980 to 1990. The number of branches of local banks is used as a proxy for credit availability to control for the reverse causality. We assume that the number of branches is not affected by asset price in line with the administrative guidance regarding branch-related restrictions provided by the Ministry of Finance. The main result is that credit availability influences land price directly and positively. Most importantly, the analysis yields qualitatively similar results even when using the subsample of rural areas, where land prices are typically low.