Munich Personal RePEc Archive

Are Credit Shocks Supply or Demand Shocks?

Bijapur, Mohan (2013): Are Credit Shocks Supply or Demand Shocks?

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Abstract

This paper provides new insights into the relationship between the supply of credit and the macroeconomy. We present evidence that credit shocks constitute shocks to aggregate supply in that they have a permanent effect on output and cause inflation to rise in the short term. Our results also suggest that the effects on aggregate supply have grown stronger in recent decades.

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