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Credit Cards and Monetary Policy: Are Households still liquidity-constrained?

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  • Ryan R. Brady

    (United States Naval Academy)

Abstract

That the lending channel is alive and well for consumer lending is at first glance a compelling notion given the growth in consumer credit. However, this paper demonstrates with disaggregated monthly and quarterly consumer credit data that households are awash in liquidity. Contrary to assumptions motivating the lending channel, households are not constrained in accessing credit from any lender (or in any form) in response to a monetary shock. The findings of this paper have important implications for research on the monetary transmission mechanism beyond the lending channel and for business cycle research in general.

Suggested Citation

  • Ryan R. Brady, 2006. "Credit Cards and Monetary Policy: Are Households still liquidity-constrained?," Departmental Working Papers 12, United States Naval Academy Department of Economics.
    • Handle: RePEc:usn:usnawp:12
    as

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    File URL: http://www.usna.edu/EconDept/RePEc/usn/wp/usnawp12.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Brady, Ryan R., 2008. "Structural breaks and consumer credit: Is consumption smoothing finally a reality?," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1246-1268, September.

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