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

Abstract

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.

Monetary Interventions and the Rise of Non-Bank Lenders

“…The four GIRFs, one for each credit aggregate, are in Figure 10 in the appendix. Coherently to our hypothesis, their reading suggests that an increase of bank loans and mortgages has indeed a positive effect on the GDP in the first period (this is the expected theoryconsistent outcome, see Gambetti & Musso 2017, Cafiso 2021, but that effect is null in the second period.…”

On the differential response of loans to shocks in the USA

“…We focus on structural IRFs to study the effect of a monetary shock, and of other shocks, on the loan aggregates and figure out an explanation of the loan puzzle. A comparable VAR analysis is used by Cafiso (2021) to study the effect of loan shocks on economic activity in the context of the Global Financial Crisis.…”