On the Macroeconomic Effects of Credit Shocks
In this paper we study how credit shocks, that is, shocks affecting the ability to raise external funds for borrowers, affect macroeconomic fluctuations. A positive credit shock leads to a typical macroeconomic boom, with an expansion in consumption, investment, labor, output and productivity. In addition to credit shocks, we also consider the typical TFP shocks that effect productivity directly. We structurally estimate the model with both shocks to the US data using Bayesian methods and find that credit shocks contribute significantly to the US business cycle fluctuations. Credit shocks are also the major force for the fluctuations in financial flows.
Year of publication: |
2009
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Authors: | Quadrini, Vincenzo ; Jermann, Urban |
Institutions: | Society for Economic Dynamics - SED |
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