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Quantity rationing of credit and the Phillips curve

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  • Waters, George A.

Abstract

Quantity rationing of credit, when some firms are denied loans, has macroeconomic effects not fully captured by measures of borrowing costs. This paper develops a monetary DSGE model with quantity rationing and derives a Phillips curve relation where inflation dynamics depend on excess unemployment, a risk premium and the fraction of firms receiving financing. Excess unemployment is defined as that which arises from disruptions in credit flows. GMM estimates using data from a survey of bank managers confirms the importance of these variables for inflation dynamics.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 37 (2013)
Issue (Month): C ()
Pages: 68-80

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Handle: RePEc:eee:jmacro:v:37:y:2013:i:c:p:68-80

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Quantity rationing; Phillips curve; Unemployment; GMM;

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