Intra-Financial Lending, Credit, and Capital Formation

Juan Montecino () and Gerald Epstein ()
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Gerald Epstein: University of Massachusetts, Amherst

No 21, Working Papers Series from Institute for New Economic Thinking

Abstract: This paper examines the effects of intra-financial lending claims between financial institutions on aggregate investment and credit to the non-financial sector in the United States. Building on Montecino, Epstein, and Levina (2014) we document a large growth in intra-financial assets beginning in the early 1980s. Using a vector autoregression model, we find that intra-financial lending is negatively related to gross capital formation and present evidence that this operates through a credit channel. However, we also find evidence of a structural break around the year 2000. Rolling impulse response functions suggest the presence of two alternative regimes over the post-war period: a capital diversion.

JEL-codes: G01 G10 G20 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-12
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:21

DOI: 10.2139/ssrn.2682877

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