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The importance of credit for macroeconomic activity: identification through heterogeneity

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Abstract

Recent work in macroeconomics emphasizes the role of credit in the transmission mechanism for monetary policy and as a propagation mechanism of business cycle shocks.1 Wlule much evidence has been gathered, not all researchers agree on the relevance of credit for the transmission of monetary policy nor for its relevance as a propagation mechanism of business cycle shocks. For the most part, every one agrees on the facts at hand but differs on their interpretation. In short, the argument is over identification. The primary purpose of this paper is to clarify the identification issues involved; to highlight those identification schemes that are promising avenues for measuring the importance of credit in aggregate fluctuations; and to provide a discussion of both previous evidence and new evidence in light of the identification schemes proposed.
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  • Simon Gilchrist & Egon Zakrajšek, 1995. "The importance of credit for macroeconomic activity: identification through heterogeneity," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 39, pages 129-173.
    • Handle: RePEc:fip:fedbcp:y:1995:p:129-173:n:39
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    File URL: http://www.bostonfed.org/economic/conf/conf39/conf39e.pdf
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    1. Rebel A. Cole & John D. Wolken, 1995. "Financial services used by small businesses: evidence from the 1993 National Survey of Small Business Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 629-667.
    2. Gregory E. Elliehausen & John D. Wolken, 1990. "Banking markets and the use of financial services by small and medium- sized businesses," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 801-817.
    3. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
    4. Mark Gertler & Simon Gilchrist, 1993. "The role of credit market imperfections in the monetary transmission mechanism: arguments and evidence," Finance and Economics Discussion Series 93-5, Board of Governors of the Federal Reserve System (U.S.).
    5. Gertler, Mark & Gilchrist, Simon, 1993. " The Role of Credit Market Imperfections in the Monetary Transmission Mechanism: Arguments and Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(1), pages 43-64.
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