Output and Inflation Responses to Credit Shocks: Are There Threshold Effects in the Euro Area?

32 Pages Posted: 1 Jun 2005

See all articles by Alessandro Calza

Alessandro Calza

European Central Bank (ECB)

João Sousa

Banco de Portugal

Date Written: April 2005

Abstract

This paper investigates whether output and inflation respond asymmetrically to credit shocks in the euro area. The methodology, based on a non-linear VAR system, follows work by Balke (2000) for the US. The results reveal evidence of threshold effects related to credit conditions in the economy. Consistent with this finding, the impulse responses show some signs of asymmetric responses over the lending cycle.

Keywords: credit, euro area, asymmetric shocks, non-linearities

JEL Classification: E51, C15, C32

Suggested Citation

Calza, Alessandro and Sousa, João, Output and Inflation Responses to Credit Shocks: Are There Threshold Effects in the Euro Area? (April 2005). Available at SSRN: https://ssrn.com/abstract=704555

Alessandro Calza (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

João Sousa

Banco de Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

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