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

Liu, C ORCID: https://orcid.org/0000-0003-3770-4821 and Minford, P, 2014. How important is the credit channel? An empirical study of the US banking crisis. Journal of Banking & Finance, 41, pp. 119-134. ISSN 0378-4266

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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.

Item Type:	Journal article
Publication Title:	Journal of Banking & Finance
Creators:	Liu, C. and Minford, P.
Publisher:	Elsevier
Date:	2014
Volume:	41
ISSN:	0378-4266
Identifiers:	Number Type 10.1016/j.jbankfin.2013.12.017 DOI
Rights:	Copyright © 2014 Elsevier B.V.
Divisions:	Schools > Nottingham Business School
Record created by:	EPrints Services
Date Added:	09 Oct 2015 11:12
Last Modified:	09 Jun 2017 13:52
URI:	https://irep.ntu.ac.uk/id/eprint/24238

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