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dc.contributor.authorScheffel, Ericen_US
dc.date.accessioned2010-02-24en_US
dc.date.accessioned2012-11-02T14:29:29Z-
dc.date.available2012-11-02T14:29:29Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/65814-
dc.description.abstractIn a seminal study Hodrick et al. (1991) evaluate the ability of a simple cash-credit model to produce realistic variability in consumption velocity while at the same time successfully explaining other key statistics. Sufficient variability in the latter is found to be associated with far too volatile interest rate behaviour. Introducing habit-formation in consumption into a production-based cash costly-credit model (see Gillman and Benk, 2007) makes the evolution of deposits more rigid relative to credit. The same deposit rigidity leads to a more volatile price of credit, causing credit production overshooting relative to deposits. But only by introducing adjustment costs to investment in addition to habit persistence does credit production overshoot sufficiently to produce realistic variability in consumption velocity. The model succeeds in capturing sufficient variability in consumption velocity without obtaining too volatile interest rates. Also, this model of endogenous velocity does not suffer from indeterminacy problems discussed in Auray et al. (2005). In contrast to Gillman and Benk (2007), the present study examines the role of the price-channel of credit production at business cycle frequency, ignoring or holding fixed the marginal cost channel stemming from credit productivity shocks.en_US
dc.language.isoengen_US
dc.publisherCardiff University, Cardiff Business School Cardiffen_US
dc.relation.ispartofseriesCardiff Economics Working Papers E2008/31en_US
dc.subject.jelE0en_US
dc.subject.jelE2en_US
dc.subject.jelE3en_US
dc.subject.jelE4en_US
dc.subject.ddc330en_US
dc.subject.keywordVelocityen_US
dc.subject.keywordConsumptionen_US
dc.subject.keywordInterest Ratesen_US
dc.subject.stwKonsumentenverhaltenen_US
dc.subject.stwVerbraucherkrediten_US
dc.subject.stwZinsen_US
dc.subject.stwVolatilit├Ąten_US
dc.subject.stwEinkommenshypotheseen_US
dc.subject.stwTheorieen_US
dc.titleConsumption velocity in a cash costly-credit modelen_US
dc.typeWorking Paperen_US
dc.identifier.ppn591188406en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Cardiff Economics Working Papers, Cardiff Business School, Cardiff University

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