The Effects of Credit Supply Shocks on Durable and Nondurable Consumption (in Korean)

Kwanghwan Kim () and Sukgee Choi ()
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Kwanghwan Kim: School of Economics, Yonsei University
Sukgee Choi: Monetary Policy Department, The Bank of Korea

No 2017-9, Working Papers from Economic Research Institute, Bank of Korea

Abstract: This paper shows the role of wage stickiness in the transmission of credit supply shock in a two-sector New Keynesian model with a collateral constraints. In the vector autoregression(VAR) analysis, durable goods and nondurable goods comove in response to a credit supply shock. However, in a two-sector New Keynesian model with flexible wage, the output of nondurables decreases, while the output of durables and total output increase in response to a negative credit supply shock(LTV ratio tightening). Therefore, the comovement problem in two-sector New Keynesian model arises to a credit supply shock. If we introduce the nominal wage stickiness, the output of nondurables and durables decrease together and, as a result, total output also decreases. This result is robust to the degree of wage stickiness and to durable price stickiness. The share of borrowers also does not influence the main result.

Keywords: Credit supply shock; Durable goods; Comovement; Sticky wage (search for similar items in EconPapers)
JEL-codes: E32 E51 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2017-03-09
New Economics Papers: this item is included in nep-dge and nep-mac
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