Open AccessBank Revolving Credit as a Channel of Monetary Policy Targeting Interest Rates
Author(s) -
Mujtaba Zia,
AUTHOR_ID,
JENNIFER LOGAN,
AUTHOR_ID
Publication year - 2021
Publication title -
the review of finance and banking
Language(s) - English
Resource type - Journals
eISSN - 2067-2713
pISSN - 2067-3825
DOI - 10.24818/rfb.21.13.02.05
Subject(s) - credit card interest , credit card , credit reference , interest rate , installment credit , monetary policy , credit channel , credit history , business , instrumental variable , atm card , monetary economics , economics , financial system , finance , inflation targeting , credit risk , payment , econometrics
This paper investigates the implication of bank revolving credit in the form of credit card loans as a channel of monetary policy targeting the federal funds rate since 1980. Credit cards have become increasingly popular and a necessity for many transactions and purchases in the United States. The revolving credit nature of credit card loans makes them an instant tool for consumer loans that can facilitate consumption. Using instrumental variable and two-stage least squares (2SLS) methodology, we analyze the implication of credit card loans to modern monetary policy that targets interest rates.