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Inside Money, Credit, and Investment (2006)
| Citations: | 2 - 0 self |
BibTeX
@MISC{Dressler06insidemoney,,
author = {Scott Dressler and Victor Li and Scott J. Dressler and Victor Li},
title = {Inside Money, Credit, and Investment},
year = {2006}
}
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Abstract
This paper presents a monetary explanation for several business-cycle facts: (i) household and business investment are procyclical, (ii) business investment lags house-hold investment, (iii) household investment is positively correlated with M1, and (iv) household credit outstanding is positively correlated with and more volatile than house-hold investment. We develop a dynamic general equilibrium model that features finan-cial intermediaries accepting deposits and providing loans, credit-producing firms, and inside (bank-created) money. It is shown that the transmission of monetary shocks facilitated by credit and inside money creation is able to reconcile these real and mon-etary observations regarding the cyclical behavior of investment.
