Credit Matters : Empirical Evidence on U.S. Macro-Financial Linkages.

By: Bayoumi, TamimContributor(s): Melander, OlaMaterial type: TextTextSeries: IMF Working PapersPublisher: Washington : International Monetary Fund, 2008Copyright date: ©2008Description: 1 online resource (29 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9781451914801Subject(s): Bank assets -- Econometric models -- United States | Credit -- United States -- Econometric models | United States -- Economic conditions -- Econometric modelsGenre/Form: Electronic books.Additional physical formats: Print version:: Credit Matters : Empirical Evidence on U.S. Macro-Financial LinkagesDDC classification: 332.70973 LOC classification: HG3729.U5 -- .B396 2008ebOnline resources: Click to View
Contents:
Intro -- Contents -- I. Introduction -- II. A Framework for Analyzing Macro-Financial Linkages -- III. The Effect of the Bank Capital/Asset Ratio on Lending Standards -- IV. The Effect of Lending Standards and Balance Sheets on Credit -- V. The Effect of Credit on Spending -- VI. The Effect of Spending on Income -- VII. Feedback Loop through Balance Sheets of Banks, Firms and Households -- VIII. Bottom Line: Quantitative Importance of Macro-Financial Linkages -- IX. Conclusions -- References -- Figures -- 1. A Framework for Macro-Financial Linkages -- 2. Bank Capital Adequacy and Lending Standards -- 3. The Effects of an Adverse Bank Capital Shock -- 4. The Impact of an Adverse Capital Shock on the Level of GDP and its Components -- 5. The Impact of an Adverse Capital Shock on GDP Growth and the Contribution of GDP Components -- 6. The Effects of an Adverse Demand Shock -- 7. The Impact of an Adverse Demand Shock on the Level of GDP -- Tables -- 1. The Bank Capital/Asset Ratio and Loan Standards -- 2. Loan Standards, Balance Sheet Variables, and Credit -- 3. The Effect of Credit on Spending -- 4. The Effect of Spending on Income -- 5. Feedback Effects of GDP Growth on Bank Capital -- 6. Loan Standards, Balance Sheet Variables, and Bank Credit -- 7. The Effect of Credit on Personal Consumption Expenditure -- Appendices -- I. Credit Regressions for Bank Lending -- II. Spending Regressions for Sub-Components of Consumption.
Summary: This paper develops a framework for analyzing macro-financial linkages in the United States. We estimate the effects of a negative shock to banks' capital/assetratio on lending standards, which in turn affect consumer credit, mortgages, and corporate loans, and the corresponding components of private spending (consumption, residential investment and business investment). In addition, our empirical model allows for feedback from spending and income to bank capital adequacy and credit. Hence, we trace the full credit cycle. An exogenous fall in the bank capital/asset ratio by one percentage point reduces real GDP by some 1½ percent through its effects on credit availability, while an exogenous fall in demand of 1 percent of GDP is gradually magnified to around 2 percent through financial feedback effects.
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Intro -- Contents -- I. Introduction -- II. A Framework for Analyzing Macro-Financial Linkages -- III. The Effect of the Bank Capital/Asset Ratio on Lending Standards -- IV. The Effect of Lending Standards and Balance Sheets on Credit -- V. The Effect of Credit on Spending -- VI. The Effect of Spending on Income -- VII. Feedback Loop through Balance Sheets of Banks, Firms and Households -- VIII. Bottom Line: Quantitative Importance of Macro-Financial Linkages -- IX. Conclusions -- References -- Figures -- 1. A Framework for Macro-Financial Linkages -- 2. Bank Capital Adequacy and Lending Standards -- 3. The Effects of an Adverse Bank Capital Shock -- 4. The Impact of an Adverse Capital Shock on the Level of GDP and its Components -- 5. The Impact of an Adverse Capital Shock on GDP Growth and the Contribution of GDP Components -- 6. The Effects of an Adverse Demand Shock -- 7. The Impact of an Adverse Demand Shock on the Level of GDP -- Tables -- 1. The Bank Capital/Asset Ratio and Loan Standards -- 2. Loan Standards, Balance Sheet Variables, and Credit -- 3. The Effect of Credit on Spending -- 4. The Effect of Spending on Income -- 5. Feedback Effects of GDP Growth on Bank Capital -- 6. Loan Standards, Balance Sheet Variables, and Bank Credit -- 7. The Effect of Credit on Personal Consumption Expenditure -- Appendices -- I. Credit Regressions for Bank Lending -- II. Spending Regressions for Sub-Components of Consumption.

This paper develops a framework for analyzing macro-financial linkages in the United States. We estimate the effects of a negative shock to banks' capital/assetratio on lending standards, which in turn affect consumer credit, mortgages, and corporate loans, and the corresponding components of private spending (consumption, residential investment and business investment). In addition, our empirical model allows for feedback from spending and income to bank capital adequacy and credit. Hence, we trace the full credit cycle. An exogenous fall in the bank capital/asset ratio by one percentage point reduces real GDP by some 1½ percent through its effects on credit availability, while an exogenous fall in demand of 1 percent of GDP is gradually magnified to around 2 percent through financial feedback effects.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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