Quantity rationing of credit
AbstractQuantity rationing of credit, when firms are denied loans, has greater potential to explain macroeconomic fluctuations than borrowing costs. This paper develops a DSGE model with both types of financial frictions. A deterioration in credit market confidence leads to a temporary change in the interest rate, but a persistent change in the fraction of firms receiving financing, which leads to a persistent fall in real activity. Empirical evidence confirms that credit market confidence, measured by the survey of loan officers, is a significant leading indicator for capacity utilization and output, while borrowing costs, measured by interest rate spreads, is not.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 3/2012.
Length: 26 pages
Date of creation: 17 Jan 2012
Date of revision:
quantity rationing; credit; VAR;
Other versions of this item:
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-01 (All new papers)
- NEP-CBA-2012-02-01 (Central Banking)
- NEP-DGE-2012-02-01 (Dynamic General Equilibrium)
- NEP-MAC-2012-02-01 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pesaran, M. H. & Shin, Y., 1997.
"Generalised Impulse Response Analysis in Linear Multivariate Models,"
Cambridge Working Papers in Economics
9710, Faculty of Economics, University of Cambridge.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
- Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
- Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999.
"The financial accelerator in a quantitative business cycle framework,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
- Monacelli, Tommaso, 2009.
"New Keynesian models, durable goods, and collateral constraints,"
Journal of Monetary Economics,
Elsevier, vol. 56(2), pages 242-254, March.
- Monacelli, Tommaso, 2006. "New Keynesian Models, Durable Goods and Collateral Constraints," CEPR Discussion Papers 5916, C.E.P.R. Discussion Papers.
- Charles T. Carlstrom & Timothy S. Fuerst, 1996.
"Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis,"
9602, Federal Reserve Bank of Cleveland.
- Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, vol. 87(5), pages 893-910, December.
- Lown, Cara & Morgan, Donald P., 2006.
"The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 38(6), pages 1575-1597, September.
- Lown, Cara & Morgan, Donald P., 2004. "The Credit Cycle and the Business Cycle: New Findings Using the Loan Officer Opinion Survey," SIFR Research Report Series 27, Institute for Financial Research.
- Lawrence J. Christiano & Martin Eichenbaum & Sergio Rebelo, 2010.
"When is the government spending multiplier large?,"
CQER Working Paper
2010-01, Federal Reserve Bank of Atlanta.
- Ravenna, Federico & Walsh, Carl E., 2006. "Optimal monetary policy with the cost channel," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 199-216, March.
- Nobuhiro Kiyotaki & John Moore, 2004.
"Liquidity, Bussiness Cycles and Monetary Policy,"
ESE Discussion Papers
113, Edinburgh School of Economics, University of Edinburgh.
- Nobuhiro Kiyotaki & John Moore, 2012. "Liquidity, Business Cycles, and Monetary Policy," NBER Working Papers 17934, National Bureau of Economic Research, Inc.
- John Moore & Nobuhiro Kiyotaki, 2008. "Liquidity, Business Cycles, and Monetary Policy," 2008 Meeting Papers 35, Society for Economic Dynamics.
- Faia, Ester & Monacelli, Tommaso, 2007.
"Optimal interest rate rules, asset prices, and credit frictions,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 31(10), pages 3228-3254, October.
- Tommaso Monacelli & Ester Faia, 2005. "Optimal Interest Rate Rules, Asset Prices and Credit Frictions," Computing in Economics and Finance 2005 452, Society for Computational Economics.
- Jacobson, Tor & Linde, Jesper & Roszbach, Kasper, 2005.
"Exploring interactions between real activity and the financial stance,"
Journal of Financial Stability,
Elsevier, vol. 1(3), pages 308-341, April.
- Jacobson, Tor & Lindé, Jesper & Roszbach, Kasper, 2005. "Exploring Interactions between Real Activity and the Financial Stance," Working Paper Series 184, Sveriges Riksbank (Central Bank of Sweden).
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
- Anil Kashyap & Jeremy C. Stein, 1993.
"Monetary Policy and Bank Lending,"
NBER Working Papers
4317, National Bureau of Economic Research, Inc.
- George A. Waters, 2013. "Quantity versus Price Rationing of Credit: An Empirical Test," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(3), pages 45-53, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman).
If references are entirely missing, you can add them using this form.