Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212206 
Year of Publication: 
2012
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 3/2012
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Quantity rationing of credit, when firms are denied loans, has greater potential to explain macroeconomics fluctuations than borrowing costs. This paper develops a DSGE model with both types of financial frictions. A deterioration in credit market confidence leads to a temporary change in the interest rate, but a persistent change in the fraction of firms receiving financing, which leads to a persistent fall in real activity. Empirical evidence confirms that credit market confidence, measured by the survey of loan officers, is a significant leading indicator for capacity utilization and output, while borrowing costs, measured by interest rate spreads, is not.
Subjects: 
quantity rationing
credit
VAR
JEL: 
E10
E24
E44
E50
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-786-3
Document Type: 
Working Paper

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