Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129750
Authors: 
Piffer, Michele
Year of Publication: 
2016
Series/Report no.: 
DIW Discussion Papers 1559
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. The 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.
Subjects: 
monetary shocks
risk-taking channel
SVAR with external instruments
JEL: 
E52
E58
Document Type: 
Working Paper

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