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Credit Market Shocks, Monetary Policy, and Economic Fluctuations

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  • Alberto Ortiz Bolaños

    (Centro de Estudios Monetarios Latinoamericanos (CEMLA))

Abstract

This paper uses a dynamic stochastic general equilibrium model with credit market imperfections to estimate the role of credit market shocks and monetary policy in us business cycles. The estimated model captures much of the historical narrative regarding the conduct of monetary policy and developments in financial markets that led to episodes of financial excess and distress over the last two decades. The estimation suggests that credit market shocks are an important factor behind economic fluctuations accounting for 15% of the variance in real output since 1985. In addition, we find that once credit market imperfections are considered, monetary policy is also an important force behind real output fluctuations explaining 12.5% of its variance.

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Bibliographic Info

Article provided by Centro de Estudios Monetarios Latinoamericanos in its journal Monetaria.

Volume (Year): I (2013)
Issue (Month): 2 (July-December)
Pages: 317-369

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Handle: RePEc:cml:moneta:v:i:y:2013:i:2:p:317-369

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Related research

Keywords: financial accelerator; monetary policy; dsge models; Bayesian estimation.;

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  10. Gilchrist, Simon & Yankov, Vladimir & Zakrajsek, Egon, 2009. "Credit market shocks and economic fluctuations: Evidence from corporate bond and stock markets," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 471-493, May.
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  12. Khemraj, Tarron & Pasha, Sukrishnalall, 2009. "The determinants of non-performing loans: an econometric case study of Guyana," MPRA Paper 53128, University Library of Munich, Germany.
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