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Consumer Credit, Liquidity, And The Transmission Mechanism Of Monetary Policy

  • RYAN R. BRADY

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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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 49 (2011)
Issue (Month): 1 (01)
Pages: 246-263

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Handle: RePEc:bla:ecinqu:v:49:y:2011:i:1:p:246-263
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