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

Listed author(s):
  • Benk, Szilárd
  • Gillman, Max

    ()

    (Cardiff Business School)

  • Kejak, Michal

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).

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Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2005/13.

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Length: 30 pages
Date of creation: Dec 2005
Publication status: Published in Review of Economic Dynamics
Handle: RePEc:cdf:wpaper:2005/13
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Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers

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  22. Philip E. Strahan, 2003. "The real effects of U.S. banking deregulation," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 111-128.
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