Quantity Rationing of Credit
AbstractQuantity rationing of credit, when ?firms are denied loans, has greater potential to explain macroeconomics ?fluctuations than borrowing costs. This paper develops a DSGE model with both types of financial frictions. A deterioration in credit market con?fidence 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 confi?rms that credit market con?fidence, measured by the survey of loan officers, is a signi?cant leading indicator for capacity utilization and output, while borrowing costs, measured by interest rate spreads, is not.
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Bibliographic InfoPaper provided by Illinois State University, Department of Economics in its series Working Paper Series with number 20111005.
Length: 23 pages
Date of creation: Oct 2011
Date of revision:
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Web page: http://economics.illinoisstate.edu
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-2011-11-01 (All new papers)
- NEP-BAN-2011-11-01 (Banking)
- NEP-CBA-2011-11-01 (Central Banking)
- NEP-CFN-2011-11-01 (Corporate Finance)
- NEP-DGE-2011-11-01 (Dynamic General Equilibrium)
- NEP-MAC-2011-11-01 (Macroeconomics)
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