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

A. Patrick Minford and Chunping Liu ()

No 9142, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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. The credit channel is 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: 2012-09
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: How important is the credit channel? An empirical study of the US banking crisis (2014)
Working Paper: How important is the credit channel? An empirical study of the US banking crisis (2013)
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