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A Semiparametric Time Trend Varying Coefficients Model: With An Application to Evaluate Credit Rationing in U.S. Credit Market

  • Jingping Gu


    (Department of Economics, University of Arkansas)

  • Paula Hernandez-Verme


    (Department of Economics and Finance, Universidad de Guanajuato)

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    In this paper, we propose a new semiparametric varying coefficient model which extends the existing semi-parametric varying coefficient models to allow for a time trend regressor with smooth coefficient function. We propose to use the local linear method to estimate the coefficient functions and we provide the asymptotic theory to describe the asymptotic distribution of the local linear estimator. We present an application to evaluate credit rationing in the U.S. credit market. Using U.S. monthly data (1952.1-2008.1) and using inflation as the underlying state variable, we find that credit is not rationed for levels of inflation that are either very low or very high. For the remaining values of inflation in the sample, we find that credit is rationed and the Mundell-Tobin effect holds.

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    Paper provided by Universidad de Guanajuato, Department of Economics and Finance in its series Department of Economics and Finance Working Papers with number EM200902.

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    Length: 24 pages
    Date of creation: Aug 2009
    Date of revision:
    Handle: RePEc:gua:wpaper:em200902
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