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THE ROLE OF CREDIT AGGREGATES AND ASSET PRICES IN THE TRANSMISSION MECHANISM: A COMPARISON BETWEEN THE EURO AREA AND THE USA
Author(s) -
KAUFMANN SYLVIA,
VALDERRAMA MARIA TERESA
Publication year - 2010
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02139.x
Subject(s) - economics , asset (computer security) , vector autoregression , monetary economics , inflation (cosmology) , real economy , markov chain , monetary transmission mechanism , monetary policy , transmission (telecommunications) , inflation targeting , credit channel , physics , computer security , computer science , electrical engineering , machine learning , theoretical physics , engineering
We analyse the interaction between credit and asset prices in the transmission of shocks to the real economy using a Markov switching vector autoregression. While we confirm the existence of different regimes, we find no evidence of financial imbalances coming from mutually reinforcing effects of lending and asset prices in the euro area. In the USA, on the contrary, there is some evidence for reinforcing effects between asset prices and lending. Moreover, it turns out that in the USA asset prices are important determinants of GDP, while in the euro area lending is an important determinant of inflation.