Quantity Rationing of Credit and the Phillips Curve

George Waters

No 20111004, Working Paper Series from Illinois State University, Department of Economics

Abstract: Quantity rationing of credit, when some ?firms are denied loans, has macroeconomics effects not fully captured by measures of borrowing costs. This paper develops a monetary DSGE model with quantity rationing and derives a Phillips Curve relation where in?flation dynamics depend on cyclical unemployment, a risk premium and the fraction of fi?rms receiving ?financing. Unemployment arising from disruptions in credit ?flows is defi?ned to be cyclical. GMM estimates using data from a survey of bank managers con?firms the importance of these variables for in?flation dynamics.

Keywords: Quantity Rationing; Phillips Curve; Cyclical Unemployment; GMM (search for similar items in EconPapers)
JEL-codes: E24 E31 E51 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011-10
New Economics Papers: this item is included in nep-cba and nep-mac
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Journal Article: Quantity rationing of credit and the Phillips curve (2013)
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