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The Effects of Credit Supply Shocks on Durable and Nondurable Consumption (in Korean)

Author

Listed:
  • Kwanghwan Kim

    (School of Economics, Yonsei University)

  • Sukgee Choi

    (Monetary Policy Department, The Bank of Korea)

Abstract

This paper shows the role of wage stickiness in the transmission of credit supply shock in a two-sector New Keynesian model with a collateral constraints. In the vector autoregression(VAR) analysis, durable goods and nondurable goods comove in response to a credit supply shock. However, in a two-sector New Keynesian model with flexible wage, the output of nondurables decreases, while the output of durables and total output increase in response to a negative credit supply shock(LTV ratio tightening). Therefore, the comovement problem in two-sector New Keynesian model arises to a credit supply shock. If we introduce the nominal wage stickiness, the output of nondurables and durables decrease together and, as a result, total output also decreases. This result is robust to the degree of wage stickiness and to durable price stickiness. The share of borrowers also does not influence the main result.

Suggested Citation

  • Kwanghwan Kim & Sukgee Choi, 2017. "The Effects of Credit Supply Shocks on Durable and Nondurable Consumption (in Korean)," Working Papers 2017-9, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:1709
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    More about this item

    Keywords

    Credit supply shock; Durable goods; Comovement; Sticky wage;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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