Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088943 | Journal of Banking & Finance | 2014 | 16 Pages |
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.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Chunping Liu, Patrick Minford,