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Monetary policy, credit and aggregate supply: the evidence from Italy

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Author Info

  • R.Fiorentini

    (University of Pavia)

  • R.Tamborini

    (University of Trento)

Abstract

This paper relates to the macroeconomic and monetary policy aspects of the so-called "credit channel" of monetary transmission. We present an intertemporal macroeconomic equilibrium model of a competitive economy where current production is financed by bank credit, and then we use it to identify the credit transmission mechanism in data drawn from the Italian economy. We find evidence that the "credit variables" identified by the model, the overnight rate and a measure of credit risk, have permanent effects on employment and output through the supply side of the economy by altering credit supply conditions to firms.

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Bibliographic Info

Paper provided by EconWPA in its series General Economics and Teaching with number 0004008.

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Length: 55 pages
Date of creation: 23 Nov 2000
Date of revision:
Handle: RePEc:wpa:wuwpgt:0004008

Note: Type of Document - Word97; prepared on IBM PC; to print on HP Laserjet; pages: 55; figures: included
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Web page: http://128.118.178.162

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Keywords: Monetary policy; Credit; Italian economy;

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References

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Cited by:
  1. Holly, S. & Santoro, E., 2008. "Financial Fragility, Heterogeneous Firms and the Cross Section of the Business Cycle," Cambridge Working Papers in Economics 0846, Faculty of Economics, University of Cambridge.

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