GDP Growth through Private Debt: The Effect of Monetary Shocks

Cafiso, Gianluca

doi:10.1093/cesifo/ify027

Cited by 6 publications

(5 citation statements)

References 30 publications

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“…Credit availability influences the real economy in the short run via its capacity to expand aggregate demand components (Khan and Thomas, 2013; Guerrieri and Lorenzoni, 2017), household consumption and firms’ investments in the first place (Cafiso, 2019). A large increase in credit to the economy in the last few decades has been observed and explained.…”

Section: Loan Shocks and Economic Activity: A Short Review Of The Lit...mentioning

confidence: 99%

Loans to Different Groups and Economic Activity at Times of Crisis and Growth*

Cafiso

2021

Oxf Bull Econ Stat

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We study the contribution of loans, granted to different borrower groups, to economic activity in the United States over the period 1971q1-2018q4. In general, loans to households emerge as the most important driver of economic activity when compared to other borrower groups. Meanwhile, for loans in terms of scope, consumer credit has a prime role. Deep economic recessions occurred during the period considered, we focus on the recent global financial crisis (GFC) to reveal the role of the credit crunch. The analysis confirms that loans had a large negative effect during the GFC when compared to other concurrent shocks. Furthermore, a comparison with other periods in post-war US history points to the specific role that loans played in this last crisis. The results are delivered through a historical decomposition analysis based on the estimation of a large VAR through Bayesian techniques.

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Section: Loan Shocks and Economic Activity: A Short Review Of The Lit...mentioning

confidence: 99%

Loans to Different Groups and Economic Activity at Times of Crisis and Growth*

Cafiso

2021

Oxf Bull Econ Stat

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“…(2012) for the Euro area aggregate. It emerges also when the larger debt aggregate, instead of just loans, is used for the analysis as in Cafiso (2019).…”

Section: The Loan Puzzlementioning

confidence: 99%

“…The same emerges also in a number of subsequent contributions; among others, den Haan et al (2007) for the USA, Busch et al (2010) for Germany, Giannone et al (2012) for the Euro area aggregate. It emerges also when the larger debt aggregate, instead of just loans, is used for the analysis as in Cafiso (2019).…”

Section: The Loan Puzzlementioning

confidence: 99%

On the differential response of loans to shocks in the USA

Cafiso

2022

JES

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PurposeThe purpose of this paper is to gain insights useful to explain the loan puzzle: the unexpected increase of loans to firms in case of a monetary tightening. To this end, the authors develop the analysis using several loan categories distinguished by lender, scope and borrower. This approach helps to unveil significant differences on how those categories respond to the same shock and allow to evaluate possible alternative explanations for such differences.Design/methodology/approachThe paper is empirical. The analysis is based on a large vector auto-regression, estimated using Bayesian techniques and has as object the US economy.FindingsThe findings support a supply-side explanation of the loan puzzle, i.e. banks reshuffle their portfolio in favor of short-term business loans after a monetary tightening. Moreover, the authors achieve the following results. First, the analysis shows that loans to small firms increase as well, but less than what observed with large firms: small firms stay between large firms and households. Second, considering advances and other loans allows to conclude that finance companies behave very much as banks. Third, some limited evidence suggests that not just industrial and commercial loans to firms might increase but also more long-term loans, such as mortgages.Originality/valueThe authors develop an analysis, based on state-of-the-art Bayesian techniques, that reveals the differential response of well-distinguished loan categories to several shocks; monetary and real shocks in the first place. After showing their heterogenous response, the authors discuss it in detail, with specific reference to supply and demand factors of credit intrinsic to the transmission mechanism. With respect to previous contributions, the authors consider a plurality of loan categories functional to understand the reason behind each specific response. This allows to conclude in favor of supply factors as an explanation of the unexpected increase of loans to corporate firms in case of a monetary shock.

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“…The same emerges also in a number of subsequent contributions; among the others, Den Haan et al (2007) for the US, Busch et al (2010) for Germany, Giannone et al (2012) for the Euro Area aggregate. It emerges also when the larger debt aggregate, instead of just loan liabilities, is used for the analysis as in Cafiso (2019).…”

Section: The Loan Puzzlementioning

confidence: 99%