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

Jingping Gu () and Paula Hernandez-Verme ()
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Jingping Gu: Department of Economics, University of Arkansas
Paula Hernandez-Verme: Department of Economics and Finance, Universidad de Guanajuato

No EM200902, Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance

Abstract: 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.

Keywords: non-stationarity; semi-parametric smooth coefficients; nonlinearity; credit rationing (search for similar items in EconPapers)
JEL-codes: C14 C22 E44 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-08
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