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Bank-Lending Standards, the Cost Channel and Inflation Dynamics

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  • Sylvia Kaufmann
  • Johann Scharler

Abstract

If firms borrow working capital to finance production, then nominal interest rates have a direct influence on inflation dynamics, which appears to be the case empirically. However, interest rates may only partly mirror the cost of working capital. In this paper we explore the role of bank lending standards as a potential additional cost source and evaluate their empirical importance in explaining inflation dynamics in the US and in the euro area.

Suggested Citation

  • Sylvia Kaufmann & Johann Scharler, 2009. "Bank-Lending Standards, the Cost Channel and Inflation Dynamics," Economics working papers 2009-16, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2009_16
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    References listed on IDEAS

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    More about this item

    Keywords

    New Keynesian Phillips Curve; Cost Channel; Bank Lending Standards; Bayesian Analysis;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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