Do Banks Matter? A Credit View Model for Small Open Economies
The Mundell-Fleming model is expanded to include a "credit channel" by adding a market for bank loans. In contrast to the predictions of the traditional Mundell-Fleming model, asset shifts in bank portfolios between bonds and bank loans produce aggregate demand effects in our credit-channel model. We test this hypothesis with an empirical growth model estimated with data from small open economies: the U.S. states. The evidence supports our "credit view" model's prediction that variations in bank lending decisions can produce economically significant fluctuations in aggregate demand, and may initiate or amplify economic contractions and expansions.
|Date of creation:||2003|
|Contact details of provider:|| Postal: Purnell Hall, Newark, Delaware 19716|
Phone: (302) 831-2565
Fax: (302) 831-6968
Web page: http://lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Barro, 1989.
"Economic Growth in a Cross Section of Countries,"
NBER Working Papers
3120, National Bureau of Economic Research, Inc.
- Robert J. Barro, 1998.
"Determinants of Economic Growth: A Cross-Country Empirical Study,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262522543, December.
- Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
- Gerald A. Carlino & Robert H. DeFina, 1997. "The differential regional effects of monetary policy: evidence from the U.S. States," Working Papers 97-12, Federal Reserve Bank of Philadelphia, revised 01 Mar 1998.
- Warner, Elizabeth J & Georges, Christophre, 2001. "The Credit Channel of Monetary Policy Transmission: Evidence from Stock Returns," Economic Inquiry, Western Economic Association International, vol. 39(1), pages 74-85, January.
- Peek, Joe & Rosengren, Eric S & Tootell, Geoffrey M B, 2003.
" Identifying the Macroeconomic Effect of Loan Supply Shocks,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 35(6), pages 931-946, December.
- PEEK Joe & M.B. TOOTELL Geoffrey & ROSENGREN Eric S., "undated". "Identifying the Macroeconomic Effect of Loan Supply Shocks," EcoMod2003 330700118, EcoMod.
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 2000. "Identifying the macroeconomic effect of loan supply shocks," Working Papers 00-2, Federal Reserve Bank of Boston.
- Anil K. Kashyap & Jeremy C. Stein, 1994.
"Monetary Policy and Bank Lending,"
in: Monetary Policy, pages 221-261
National Bureau of Economic Research, Inc.
- L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
- Burton A. Abrams & Margaret Z. Clarke & Russell F. Settle, 1999. "The Impact of Banking and Fiscal Policies on State-Level Economic Growth," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 367-378, October.
- John C. Driscoll, 2003.
"Does bank lending affect output? evidence from the U.S. states,"
Finance and Economics Discussion Series
2003-31, Board of Governors of the Federal Reserve System (U.S.).
- Driscoll, John C., 2004. "Does bank lending affect output? Evidence from the U.S. states," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 451-471, April.
- Ben S. Bernanke, 1983.
"Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression,"
NBER Working Papers
1054, National Bureau of Economic Research, Inc.
- Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
- N. Gregory Mankiw, 1994. "Monetary Policy," NBER Books, National Bureau of Economic Research, Inc, number greg94-1.
When requesting a correction, please mention this item's handle: RePEc:dlw:wpaper:03-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Saul Hoffman)
If references are entirely missing, you can add them using this form.