Do Credit Supply Shocks Have Asymmetric Effects?

David Finck () and Paul Rudel ()
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David Finck: Justus Liebig University Giessen
Paul Rudel: Justus Liebig University Giessen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: They do. Partly. We identify credit supply shocks via sign restrictions in a Bayesian VAR and separate them into positive and negative. Using local projections, we find that positive credit supply shocks leave notably different prints in private debt, mortgage debt, and debt: GDP, as opposed to negative credit supply shocks. This pattern is caused by the response of household mortgage debt. Furthermore, we find evidence that positive credit supply shocks are the driving force behind boom-bust cycles. Yet, developments behind the boom-bust cycle cannot explain the strong and persistent response in debt; but house prices tend to. However, if we abstract from potential asymmetries, we get rather mild results, which underestimate the true effects of credit supply shocks.

Keywords: credit supply shocks; household debt; asymmetry; local projections (search for similar items in EconPapers)
JEL-codes: C11 E21 E22 E32 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:202026

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