How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels
Credit supply expansion can affect an economy by increasing productive capacity or by boosting household demand. In this study, we develop a test to determine if the household demand channel is present, and we implement the test using both a natural experiment in the United States in the 1980s and a...
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| Format: | Article |
| Language: | English |
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Wiley
2021
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| Online Access: | https://hdl.handle.net/1721.1/130412 |
| _version_ | 1811089016925192192 |
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| author | Verner, Emil |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Verner, Emil |
| author_sort | Verner, Emil |
| collection | MIT |
| description | Credit supply expansion can affect an economy by increasing productive capacity or by boosting household demand. In this study, we develop a test to determine if the household demand channel is present, and we implement the test using both a natural experiment in the United States in the 1980s and an international panel of 56 countries over the last several decades. Consistent with the importance of the household demand channel, we find that credit supply expansion boosts nontradable sector employment and the price of nontradable goods, with limited effects on tradable sector employment. Such credit expansions amplify the business cycle and lead to more severe recessions. |
| first_indexed | 2024-09-23T14:12:31Z |
| format | Article |
| id | mit-1721.1/130412 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T14:12:31Z |
| publishDate | 2021 |
| publisher | Wiley |
| record_format | dspace |
| spelling | mit-1721.1/1304122022-10-01T19:47:48Z How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels Verner, Emil Sloan School of Management Credit supply expansion can affect an economy by increasing productive capacity or by boosting household demand. In this study, we develop a test to determine if the household demand channel is present, and we implement the test using both a natural experiment in the United States in the 1980s and an international panel of 56 countries over the last several decades. Consistent with the importance of the household demand channel, we find that credit supply expansion boosts nontradable sector employment and the price of nontradable goods, with limited effects on tradable sector employment. Such credit expansions amplify the business cycle and lead to more severe recessions. 2021-04-08T14:43:12Z 2021-04-08T14:43:12Z 2020-04 2021-04-08T14:06:06Z Article http://purl.org/eprint/type/JournalArticle 0022-1082 https://hdl.handle.net/1721.1/130412 Mian, Atif et al. “How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels.” The Journal of Finance, 75, 2 (April 2020): 949-994 © 2020 The Author(s) en 10.1111/JOFI.12869 The Journal of Finance Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Wiley SSRN |
| spellingShingle | Verner, Emil How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels |
| title | How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels |
| title_full | How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels |
| title_fullStr | How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels |
| title_full_unstemmed | How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels |
| title_short | How Does Credit Supply Expansion Affect the Real Economy? The Productive Capacity and Household Demand Channels |
| title_sort | how does credit supply expansion affect the real economy the productive capacity and household demand channels |
| url | https://hdl.handle.net/1721.1/130412 |
| work_keys_str_mv | AT verneremil howdoescreditsupplyexpansionaffecttherealeconomytheproductivecapacityandhouseholddemandchannels |