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Has Weak Lending and Activity in the UK been Driven by Credit Supply Shocks?

Listed author(s):
  • Alina Barnett
  • Ryland Thomas

This paper investigates the role of credit supply shocks in driving the weakness in UK banks’ lending and economic activity during the various UK financial crises since 1966. It uses a structural VAR analysis to identify credit supply shocks separately from standard macroeconomic shocks. It finds that credit supply shocks can account for most of the weakness in bank lending since the onset of the recent financial crisis and 1/3 – 1/2 of the fall in GDP relative to its historic trend. It also finds that credit supply shocks behave more like aggregate supply shocks than aggregate demand shocks.

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File URL: http://hdl.handle.net/10.1111/manc.12071
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Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 82 (2014)
Issue (Month): S1 (09)
Pages: 60-89

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Handle: RePEc:bla:manchs:v:82:y:2014:i:s1:p:60-89
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  1. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
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  14. Eickmeier, Sandra & Ng, Tim, 2011. "How do credit supply shocks propagate internationally? A GVAR approach," Discussion Paper Series 1: Economic Studies 2011,27, Deutsche Bundesbank, Research Centre.
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  16. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
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