How important is the credit channel? An empirical study of the US banking crisis

Chunping Liu and A. Patrick Minford

Journal of Banking & Finance, 2014, vol. 41, issue C, 119-134

Abstract: We examine whether by adding a credit channel to the standard New Keynesian model we can account better for the behaviour of US macroeconomic data up to and including the banking crisis. We use the method of indirect inference which evaluates statistically how far a model’s simulated behaviour mimics the behaviour of the data. We find that the model with credit dominates the standard model by a substantial margin. Credit shocks are the main contributor to the variation in the output gap during the crisis.

Keywords: Financial frictions; Credit channel; Bank crisis; Indirect inference (search for similar items in EconPapers)
JEL-codes: C12 C52 E12 G01 G1 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: How important is the credit channel? An empirical study of the US banking crisis (2013)
Working Paper: How important is the credit channel? An empirical study of the US banking crisis (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:41:y:2014:i:c:p:119-134

DOI: 10.1016/j.jbankfin.2013.12.017

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