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Credit Shocks in the Financial Deregulatory Era: Not the Usual Suspects

Author

Listed:
  • Szilárd Benk

    (Magyar Nemzeti Bank)

  • Max Gillman

    (Central European University)

  • Michal Kejak

    (CERGE-EI)

Abstract

The paper constructs credit shocks using data and the solution to a monetary business cycle model. The model extends the standard stochastic cash-in-advance economy by including the production of credit that serves as an alternative to money in exchange. Shocks to goods productivity, money, and credit productivity are constructed robustly using the solution to the model and quarterly US data on key variables. The contribution of the credit shock to US GDP movements is found, and this is interpreted in terms of changes in banking legislation during the US financial deregulation era. The results put forth the credit shock as a candidate shock that matters in determining GDP, including in the sense of Uhlig (2003). (Copyright: Elsevier)

Suggested Citation

  • Szilárd Benk & Max Gillman & Michal Kejak, 2005. "Credit Shocks in the Financial Deregulatory Era: Not the Usual Suspects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(3), pages 668-687, July.
  • Handle: RePEc:red:issued:v:8:y:2005:i:3:p:668-687
    DOI: 10.1016/j.red.2005.01.012
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    More about this item

    Keywords

    Business cycle; credit shocks; financial deregulation;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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