jep%2E24%2E4%2E21

The framework proposed here differs from that of

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: e relation that I call the IS curve as the “commodities and credit curve” instead, precisely because it is shifted by credit-supply shocks in addition to the usual determinants of the IS curve. The framework proposed here differs from that of Bernanke and Blinder primarily in offering a different model of the supply of intermediation. 36 Journal of Economic Perspectives to to borrow, and hence requiring further asset sales. The result is a vicious spiral that under some circumstances can substantially reduce credit supply. The resulting contraction of aggregate output may result in further losses to the banks, further reducing reducing their capital, and hence tightening credit supply even more. The Most Recent U.S. Credit Cycle Understanding Understanding variations in financial conditions over the most recent credit cycle requires attention to the behavior of multiple interest rates, not just the federal funds rate that is targeted by the Federal Reserve. As shown in Figure 5, the Fed Open Market Com...
View Full Document

Ask a homework question - tutors are online