Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/17037
Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: The role of credit in the Great Moderation: A multivariate GARCH approach
Authors: Grydaki, Maria
Bezemer, Dirk
Contact Email: maria.grydaki@stir.ac.uk
Issue Date: Nov-2013
Publisher: Elsevier
Citation: Grydaki M & Bezemer D (2013) The role of credit in the Great Moderation: A multivariate GARCH approach, Journal of Banking and Finance, 37 (11), pp. 4615-4626.
Abstract: During the Great Moderation, financial innovation in the US increased the size and scope of credit flows supporting the growth of wealth. We hypothesize that spending out of wealth came to finance a wider range of GDP components such that it smoothed GDP. Both these trends combined would be consistent with a decrease in the volatility of output. We suggest testable implications in terms of both growth of credit and output and volatility of growth. In a multivariate GARCH framework, we test this view for home mortgages and residential investment. We observe unidirectional causality in variance from total output, residential investment and non-residential output to mortgage lending before, but not during the Great Moderation. These findings are consistent with a role for credit dynamics in explaining the Great Moderation.
Type: Journal Article
URI: http://hdl.handle.net/1893/17037
DOI Link: http://dx.doi.org/10.1016/j.jbankfin.2013.01.039
Rights: The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.
Notes: Great Moderation; Mortgage credit; Multivariate GARCH; Causality
Affiliation: Economics
University of Groningen

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