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Credit Supply and Demand and Business Investment

Adrian Blundell‐Wignall and Marianne Gizycki

Australian Economic Review, 1994, vol. 27, issue 1, 101-113

Abstract: Abstract The article explores the lending behaviour of financial intermediaries over the business cycle in the light of theories emphasising agency costs. During a credit crunch loans from financial intermediaries are unobtainable at any price, and so credit may have a causal influence over economic activity. Tests of this do not find evidence of credit constraints following financial deregulation. However, since both loan supply and demand are driven by forward‐looking variables, business credit is a useful leading indicator of nominal investment.

Date: 1994
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