The Importance of Credit Demand for Business Cycle Dynamics
Gregor von Schweinitz
IWH Discussion Papers,
Nr. 21,
2023
Abstract
This paper contributes to a better understanding of the important role that credit demand plays for credit markets and aggregate macroeconomic developments as both a source and transmitter of economic shocks. I am the first to identify a structural credit demand equation together with credit supply, aggregate supply, demand and monetary policy in a Bayesian structural VAR. The model combines informative priors on structural coefficients and multiple external instruments to achieve identification. In order to improve identification of the credit demand shocks, I construct a new granular instrument from regional mortgage origination.
I find that credit demand is quite elastic with respect to contemporaneous macroeconomic conditions, while credit supply is relatively inelastic. I show that credit supply and demand shocks matter for aggregate fluctuations, albeit at different times: credit demand shocks mostly drove the boom prior to the financial crisis, while credit supply shocks were responsible during and after the crisis itself. In an out-of-sample exercise, I find that the Covid pandemic induced a large expansion of credit demand in 2020Q2, which pushed the US economy towards a sustained recovery and helped to avoid a stagflationary scenario in 2022.
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Warum ein Doktorandenstudium am IWH? Das IWH Doctoral Programme in Economics – one of the Top 20 places to do a PhD ( INOMICS Career Guide 2023 ) Am Leibniz-Institut für…
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Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
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Social Capital and Regional Innovation: Evidence from Private Firms in the US
Iftekhar Hasan, Nada Kobeissi, Bo Wang, Haizhi Wang, Desheng Yin
Regional Studies,
Nr. 1,
2023
Abstract
In this study we investigate whether and to what extent social capital may affect regional innovation by focusing on private firms in the United States. We document that regional social capital is positively associated with the quantity, quality and novelty of county-level innovation by private firms. In addition, we find that the positive relation between social capital and regional innovation is more prominent in counties with a lower supply of financial capital. We also report that social capital is complementary to investments in research and development to produce inventive outcomes in local areas. Using a spatial Durbin model, we provide evidence that regional social capital has significant spillover effects in boosting the innovation activities of neighbouring counties.
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