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Credit Supply and Demand and Business Investment
Author(s) -
BlundellWignall Adrian,
Gizycki Marianne
Publication year - 1994
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1994.tb00827.x
Subject(s) - credit crunch , financial intermediary , investment (military) , business cycle , loan , credit enhancement , deregulation , financial system , business , intermediary , supply and demand , monetary economics , credit history , finance , credit reference , economics , supply shock , monetary policy , market economy , microeconomics , credit risk , macroeconomics , politics , political science , law
The article explores the lending behaviour of financial intermediaries over the business cycle in the light of theories emphasising agency costs. During a credit crunch loans from financial intermediaries are unobtainable at any price, and so credit may have a causal influence over economic activity. Tests of this do not find evidence of credit constraints following financial deregulation. However, since both loan supply and demand are driven by forward‐looking variables, business credit is a useful leading indicator of nominal investment .