The Macroeconomic Relevance of Credit Flows: An Exploration of U.S. Data

By Alexander Herman, Deniz O Igan, Juan Sole

June 30, 2015

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Alexander Herman, Deniz O Igan, and Juan Sole. The Macroeconomic Relevance of Credit Flows: An Exploration of U.S. Data, (USA: International Monetary Fund, 2015) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper exploits the Financial Accounts of the United States to derive long time series of bank and nonbank credit to different sectors, and to examine the cyclical behavior of these series in relation to (i) the long-term business cycle, (ii) recessions and recoveries, and (iii) systemic financial crises. We find that bank and nonbank credit exhibit different dynamics throughout the business cycle. This diverging cyclical behavior of output and bank and nonbank credit argues for placing greater emphasis on sector-specific macroprudential measures to contain risks to the financial system, rather than using interest rates to address any vulnerabilities. Finally, we examine the role of bank and nonbank credit in the creation of financial interconnections and illustrate a method to conduct macro-financial stability assessments.

Subject: Bank credit, Business cycles, Consumer credit, Credit, Credit cycles, Economic growth, Financial sector policy and analysis, Money

Keywords: Bank credit, Business cycles, Consumer credit, Credit, Credit cycles, Credit to household, Credit to nonbank, Financial activity, Financial intermediation, Global, Interest rate, Liquidity transformation, Macro-financial linkages, Nonbank activity, Nonbank counterpart, Nonbank credit, Nonbank credit to bank, Nonbank credit to the private sector, Nonbank entity, Nonbank financial activity, Nonbank financial institutions, Nonbank lending, Nonbank mortgage, Nonbank sector, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/143
Stock No:

WPIEA2015143
ISBN:

9781513516448
ISSN:

1018-5941

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