Output and Inflation Responses to Credit Shocks: Are There Threshold Effects in the Euro Area?
AbstractThis paper investigates whether output and inflation respond asymmetrically to credit shocks in the euro area. The methodology, based on a non-linear VAR system, follows work by Balke (2000) for the U.S. The results reveal evidence of threshold effects related to credit conditions in the economy. Consistent with this finding, the impulse responses show some signs of asymmetric responses over the lending cycle. However, the results of the paper suggest that in the euro area non-linearities arising from credit market imperfections may be less pronounced than in the U.S., probably reflecting specific institutional features of its banking sector.
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Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 10 (2006)
Issue (Month): 2 (May)
Contact details of provider:
Web page: http://www.degruyter.com
Other versions of this item:
- Calza, Alessandro & Sousa, João, 2005. "Output and inflation responses to credit shocks: are there threshold effects in the euro area?," Working Paper Series 0481, European Central Bank.
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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