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Consumer Credit, Liquidity and the Transmission Mechanism of Monetary Policy

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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 the consumer loan-supply effect has diminished over time. 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.

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File URL: http://www.usna.edu/EconDept/RePEc/usn/wp/usnawp20.pdf
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Bibliographic Info

Paper provided by United States Naval Academy Department of Economics in its series Departmental Working Papers with number 20.

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Length: 38 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:usn:usnawp:20

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  1. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
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  6. Ryan R. Brady, 2006. "Structural Breaks and Consumer Credit: Is Consumption Smoothing Finally a Reality?," Departmental Working Papers 13, United States Naval Academy Department of Economics.
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  21. Edward Castronova & Paul Hagstrom, 2004. "The Demand for Credit Cards: Evidence from the Survey of Consumer Finances," Economic Inquiry, Western Economic Association International, vol. 42(2), pages 304-318, April.
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  24. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
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Cited by:
  1. Ryan R. Brady & Derek Stimel, 2011. "How the Housing and Financial Wealth Effects have changed over Time," Departmental Working Papers 31, United States Naval Academy Department of Economics.
  2. Ryan R. Brady & Derek Stimel & Steven Sumner, 2012. "A Time Series Test of the Direct Wealth Effect," Departmental Working Papers 40, United States Naval Academy Department of Economics.

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