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How important is the credit channel? An empirical study of the US banking crisis

Liu, Chunping and Minford, Anthony Patrick Leslie 2014. How important is the credit channel? An empirical study of the US banking crisis. Journal of Banking & Finance 41 , pp. 119-134. 10.1016/j.jbankfin.2013.12.017

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Abstract

We examine whether by adding a credit channel to the standard New Keynesian model we can account better for the behaviour of US macroeconomic data up to and including the banking crisis. We use the method of indirect inference which evaluates statistically how far a model’s simulated behaviour mimics the behaviour of the data. We find that the model with credit dominates the standard model by a substantial margin. Credit shocks are the main contributor to the variation in the output gap during the crisis.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Advanced Research Computing @ Cardiff (ARCCA)
Business (Including Economics)
Subjects: H Social Sciences > HC Economic History and Conditions
Uncontrolled Keywords: Financial frictions; credit channel; bank crisis; indirect inference.
Additional Information: Pdf uploaded in accordance with the publisher’s policy at http://www.sherpa.ac.uk/romeo/issn/0378-4266/ (accessed 30/07/2014)
Publisher: Elsevier
ISSN: 0378-4266
Date of First Compliant Deposit: 30 March 2016
Last Modified: 29 Jun 2019 04:23
URI: http://orca.cf.ac.uk/id/eprint/61656

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