Credit disruptions and the spillover effects between the household and business sectors
This paper studies the effects of credit supply disruptions in a dynamic stochastic general equilibrium (DSGE) framework. First, this paper examines the effects of credit supply disruptions in the business sector. The model with financially constrained households generates a bigger decline in aggregate consumption and GDP than the model without financially constrained households. The reason is that the spillover effect from the business sector to the household sector occurs through a labor income channel. With financially constrained households in the model, a collateral channel strengthens the spillover effects and amplifies business cycles. Then this paper examines the effects of credit supply disruptions in the household sector. A tightening of household credit conditions causes a substantial drop in aggregate consumption, which pushes inflation downward. Debt deflation further depresses consumption, labor demand, and investment, altogether generating a sharp decline in GDP.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 431 8814-1
Fax: +49 431 8814528
Web page: http://www.economics-ejournal.org/
More information through EDIRC
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.:
- Kiyotaki, Nobuhiro & Moore, John, 1997.
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 211-48, April.
- Ryo Kato, 2003. "Matlab code for Kiyotaki-Moore credit cycles," QM&RBC Codes 113, Quantitative Macroeconomics & Real Business Cycles.
- John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
- Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
- pengfei Wang & Tao Zha & Zheng Liu, 2012.
"Land-Price Dynamics and Macroeconomic Fluctuations,"
2012 Meeting Papers
85, Society for Economic Dynamics.
- Zheng Liu & Pengfei Wang & Tao Zha, 2013. "Land‐Price Dynamics and Macroeconomic Fluctuations," Econometrica, Econometric Society, vol. 81(3), pages 1147-1184, 05.
- Zheng Liu & Pengfei Wang & Tao Zha, 2011. "Land-price dynamics and macroeconomic fluctuations," NBER Working Papers 17045, National Bureau of Economic Research, Inc.
- Zheng Liu & Pengfei Wang & Tao Zha, 2011. "Land-price dynamics and macroeconomic fluctuations," Working Paper 2011-11, Federal Reserve Bank of Atlanta.
- Zheng Liu & Pengfei Wang & Tao Zha, 2011. "Land-price dynamics and macroeconomic fluctuations," Working Paper Series 2011-26, Federal Reserve Bank of San Francisco.
- Finocchiaro, Daria & Queijo von Heideken, Virginia, 2007.
"Do Central Banks React to House Prices?,"
Working Paper Series
217, Sveriges Riksbank (Central Bank of Sweden), revised 01 Aug 2009.
- Robert S. Chirinko, 1992.
"Business Fixed Investment Spending: A Critical survey of Modeling Strategies, Empirical Results, and Policy Implications,"
9213, Harris School of Public Policy Studies, University of Chicago.
- Robert S. Chirinko, 1993. "Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications," Research Working Paper 93-01, Federal Reserve Bank of Kansas City.
- Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
When requesting a correction, please mention this item's handle: RePEc:zbw:ifwedp:201348. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.