Title: Fiscal policy and lending relationships
Authors: Melina, Giovanni
Villa, Stefania
Issue Date: 2013
Publisher: IMF
Series Title: IMF Working paper 13/141 pages:1-48
Abstract: This paper studies how fiscal policy affects loan market conditions in the US. First, it conducts a Structural Vector-Autoregression analysis showing that the bank spread responds negatively to an expansionary government spending shock, while lending increases. Second, it illustrates that these results are mimicked by a Dynamic Stochastic General Equilibrium model where the bank spread is endogenized via the inclusion of a banking sector exploiting lending relationships. Third, it shows that lending relationships represent a friction that generates a financial accelerator effect in the transmission of the fiscal shock.
Publication status: published
KU Leuven publication type: ER
Appears in Collections:Research Center of International Economics, Leuven

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