Credit and Economic Activity: Credit Regimes and Nonlinear Propagation of Shocks
The Review of Economics and Statistics
2000
In this paper, we examine empirically whether credit plays a role as a nonlinear propagator of shocks. This propagation takes the form of a threshold vector autoregression in which a regime change occurs if credit conditions cross a critical threshold. Using nonlinear impulseresponse functions, we evaluate the dynamics implied by the threshold model. These suggest that shocks have a larger effect on output in the ''tight'' credit regime than is normally the case, and that contractionary monetary shocks typically have a larger effect than expansionary shocks. Finally, using a nonlinear version of historical decompositions, we attempt to determine the relative contribution to output growth of shocks and the nonlinear structure.
- DOI
- 10.1162/rest.2000.82.2.344
- Volume
- 82 (2)
- Pages
- 344-349
- Language
- en
- Export
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- Sources
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