CEU Electronic Theses and Dissertations, 2009
| Author | Benk, Szilard |
|---|---|
| Title | Essays on Monetary Business Cycle with Credit |
| Summary | This thesis examines the role of the banking sector and credit shocks, as candidates for causing some of the fluctuations in output, inflation or money velocity. The approach here is a stochastic extension of the cash-in-advance economy with a banking sector that allows for the production of credit as an alternative to cash. The stochastic extension, and in particular the productivity shocks of the banking sector allows a convenient setup for analyzing credit and banking history, where for instance, positive credit shocks could be consistent with financial deregulatory periods, and negative shocks consistent with credit crises. This work consists of six chapters. The first chapter sets up the methodological framework used in the subsequent chapters for the analysis. Chapter 2, "A comparison of exchange economies within a monetary business cycle" compares the performance of the cash-only, shopping time and credit production models in explaining the puzzles of the monetary business cycle theory. Chapter 3, "Credit shocks in the financial deregulatory era: Not the usual suspects" constructs goods productivity, money and credit productivity shocks. Credit shocks are interpreted in terms of changes in banking legislation during the US financial deregulation era, being also a candidate that matters in determining GDP fluctuations. Chapter 4, "Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks" extends the credit model to an endogenous growth framework. Money and credit shocks explain much of the velocity variation Chapter 5, "Volatility Cycles of Output and Inflation, 1919-2004: A Money and Banking Approach to a Puzzle", explains the close comovement of volatilities of GDP growth and inflation over 1919-2004 period using money and credit shocks that have different effects in different subperiods. The post-1983 moderation also coincided with an ahistorical divergence in the money aggregate growth and velocity volatilities away from the downward trending GDP and inflation volatilities. The volatility divergence is explained by the upswing in the credit volatility that kept money supply variability from translating into inflation and GDP volatility. Chapter 6, "Money and credit effects on the business cycle in Eastern Europe: Three countries, one story" extends the analysis to Hungary, Poland and Czech Republic, identifies the main shocks and investigates whether and how monetary and financial shocks influenced the movements in output, inflation and money velocity. Further, it documents the evolution of the volatilities of output, inflation, money and money velocity emphasizing a puzzling bifurcating pattern between the volatilities of money and money velocity on the one hand and that of inflation and output on the other hand. This patters shows similarities to what has been observed in US data, the explanation to such behavior being offered here within the credit model. |
| Supervisor | Horvath, Julius; Gillman, Max |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2009/cphbes01.pdf |
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