Abstract

http://ssrn.com/abstract=1570328
 
 

References (32)



 
 

Citations (4)



 


 



Credit Traps


Effi Benmelech


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Nittai Bergman


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

November 13, 2009

AFA 2011 Denver Meetings Paper

Abstract:     
This paper studies the limitations of the ‘credit channel’ in transmitting monetary policy into real economic outcomes. We focus on one particular failure of the credit channel in which although the central bank is infusing money into the banking system, liquidity remains stuck in banks and is not lent out. We use the term ‘credit traps’ to describe such situations and show how they can arise due to the interplay between financing frictions, liquidity, and collateral values. Our analysis offers a characterization of the problems created by credit traps as well as potential solutions and policy implications. Among these, the analysis shows how quantitative easing and fiscal policy acting in conjunction with monetary policy may be useful in increasing bank lending. Further, small shifts in monetary or fiscal policy can lead to collapses in lending, aggregate investment, and collateral prices.

Number of Pages in PDF File: 40

Keywords: Liquidity, Credit Channel of Monetary Policy, Collateral, Banking

JEL Classification: G21, G33, E51, E63

working papers series





Download This Paper

Date posted: March 14, 2010  

Suggested Citation

Benmelech, Effi and Bergman, Nittai, Credit Traps (November 13, 2009). AFA 2011 Denver Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1570328 or http://dx.doi.org/10.2139/ssrn.1570328

Contact Information

Efraim Benmelech
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-4787 (Phone)
617-495-8570 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Nittai Bergman (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive
Cambridge, MA 02142
United States
617-253-2933 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,265
Downloads: 173
Download Rank: 93,745
References:  32
Citations:  4

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.282 seconds