Jingping Gu () (Department of Economics, University of Arkansas) Paula Hernandez-Verme () (School of Economics, Universidad de Guanajuato)
Abstract
In this paper, we propose a new semiparametric varying coefficient model which extends the existing semi-parametric varying coefficient models to allow for a time trend regressor with smooth coefficient function. We propose to use the local linear method to estimate the coefficient functions and we provide the asymptotic theory to describe the asymptotic distribution of the local linear estimator. We present an application to evaluate credit rationing in the U.S. credit market. Using U.S. monthly data (1952.1-2008.1) and using inflation as the underlying state variable, we find that credit is not rationed for levels of inflation that are either very low or very high. For the remaining values of inflation in the sample, we find that credit is rationed and the Mundell-Tobin effect holds.
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Length: 24 pages Date of creation: Date of revision: Handle: RePEc:gua:wpaper:em200902
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Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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