The Business Cycle, Credit cost and Risk in Chile from a Structural var model's Perspective
This paper studies the interaction between the economic cycle and the credit market in Chile. The results are obtained with identification of shocks using a structural VAR model that replicates the empirical standard transmission mechanism of monetary policy that has been found in other studies on the Chilean economy. However, our evidence indicates new results. The periods of economic expansion triggers in the long run, first, increases in nonperforming loans, and then credit reductions. Besides, credit market shocks that measure the risk in the sector, non-performing loans (NPL), generate significant aggregate fluctuations in the economy. Similarly, periods of economic contraction, especially characterized by high interest rates, are followed in the medium-term by falling in the non-performing loans and then by credit booms. Finally exogenous shocks of NPLs produce marginal increases in inflation.
Volume (Year): 16 (2013)
Issue (Month): 1 (April)
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