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

Qi Gao, Jingping Gu and Paula Hernandez-Verme ()
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Qi Gao: The school of Public Finance and Taxation, Southwestern University of Finance and Economics
Jingping Gu: Department of Economics, University of Arkansas

Annals of Economics and Finance, 2012, vol. 13, issue 1, 189-210

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; and for the remaining values of inflation, we find that credit is rationed and the Mundell-Tobin effect holds.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2012:v:13:i:1:gaoguhernandez-verme

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