IDEAS home Printed from https://ideas.repec.org/a/ijc/ijcjou/y2018q3a8.html
   My bibliography  Save this article

Monetary Policy and Defaults in the United States

Author

Listed:
  • Michele Pfiffer

    (DIW Berlin)

Abstract

This paper uses a structural VAR model to study the effect of monetary policy on the delinquency rate of business loans and consumer credit. The VAR is identified using, jointly, several external instruments that reflect different approaches from the literature. Delinquency rates, defined as the rate of loans with overdue repayments relative to total loans, are found to decrease in response to an exogenous monetary expansion. The results are consistent with a general equilibrium effect formalized in the paper using a standard model of optimal defaults. According to both the theoretical model and the reported empirical evidence, the decrease in defaults is driven by the fact that monetary expansions increase aggregate demand and push up profits and income, thereby improving the repayment possibility of borrowers.

Suggested Citation

  • Michele Pfiffer, 2018. "Monetary Policy and Defaults in the United States," International Journal of Central Banking, International Journal of Central Banking, vol. 14(4), pages 327-358, September.
    • Handle: RePEc:ijc:ijcjou:y:2018:q:3:a:8
    as

    Download full text from publisher

    File URL: http://www.ijcb.org/journal/ijcb18q3a8.pdf
    Download Restriction: no
    File URL: http://www.ijcb.org/journal/ijcb18q3a8.htm
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mutarindwa, Samuel & Schäfer, Dorothea & Stephan, Andreas, 2020. "Central banks' supervisory guidance on corporate governance and bank stability: Evidence from African countries," Emerging Markets Review, Elsevier, vol. 43(C).

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2018:q:3:a:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bank for International Settlements (email available below). General contact details of provider: https://www.ijcb.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.