Monetary Policy and Defaults in the US

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 1 Abstract This paper uses a structural VAR model to study the effect of monetary policy on the delinquency rate of business loans and consumer credit. The VAR is identified using at the same time several external instruments, which cover different approaches from the literature. Delinquency rates, defined as the rate of loans whose repayment is overdue for more than a month relative to total loans, are found to decrease in response to a monetary expansion. Terms of use: Documents inThe results are consistent with a general equilibrium effect formalized in the paper using a standard model of optimal defaults. According to the model, the decrease in defaults is driven by the fact that monetary expansions increase aggregate demand and push up profits and income, thereby improving the repayment possibility of borrowers.

Same, but different? Testing monetary policy shock measures

“…1 Examples include Midrigan (2011), Stock and Watson (2012), Georgiadis (2015), Miranda-Agrippino and Rey (2015), Passari and Rey (2015), Zeev, Gunn, and Khan (2015), Balakrishnan, Laseen, and Pescatori (2016), Piffer (2016), Sinclair, Tien, and Gamber (2016) and Tenreyro and Thwaites (2016). policy shocks, we determine in this study which of the three measures should be employed when studying the effects of monetary policy on the economy.…”