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

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  • RYAN R. BRADY

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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  • Ryan R. Brady, 2011. "Consumer Credit, Liquidity, And The Transmission Mechanism Of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 246-263, January.
    • Handle: RePEc:bla:ecinqu:v:49:y:2011:i:1:p:246-263
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    Cited by:

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    2. Gonzalo Paz Pardo & José Manuel Sánchez Santos, 2014. "Household Debt and Consumption Inequality: The Spanish Case," Economies, MDPI, vol. 2(3), pages 1-24, July.
    3. 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.
    4. Ryan R. Brady & Derek Stimel & Steven Sumner, 2014. "The Rise of the Housing-Wealth Effect: Counterfactual Impulse Response Analysis," Review of Economics & Finance, Better Advances Press, Canada, vol. 4, pages 1-17, November.
    5. Norhana Endut & James Morley & Pao-Lin Tien, 2018. "The changing transmission mechanism of US monetary policy," Empirical Economics, Springer, vol. 54(3), pages 959-987, May.
    6. Nektarios A. Michail & Christos S. Savva & Demetris Koursaros, 2021. "Are central banks to blame? Monetary policy and bank lending behavior," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 762-779, October.
    7. Arango, Luis E. & Cardona-Sosa, Lina & Pedraza-Jiménez, Nataly, 2021. "The use of credit cards among low- and middle-income individuals in Colombia and the channels of monetary policy," Economic Modelling, Elsevier, vol. 94(C), pages 150-169.

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