BOK Working Paper (in Korean)

  1. Publications
  2. BOK Working Paper
  3. BOK Working Paper (in Korean)

BOK Working Paper No.2017-9, The Effects of Credit Supply Shocks on Durable and Nondurable Consumption

Economic Research Institute (+82-2-759-4488) 2017.03.08 6216

Title : The Effects of Credit Supply Shocks on Durable and Nondurable Consumption
Authors : Kwanghwan Kim(Yonsei University), Sukgee Choi(BOK)

 

<Abstract>

 

This paper shows the role of wage stickiness in the transmission of credit supply shock in a two-sector New Keynesian model with a collateral constraints. In the vector autoregression(VAR) analysis, durable goods and nondurable goods comove in response to a credit supply shock. However, in a two-sector New Keynesian model with flexible wage, the output of nondurables decreases, while the output of durables and total output increase  in response to a negative credit supply shock(LTV ratio tightening). Therefore, the comovement problem in two-sector New Keynesian model arises to a credit supply shock. If we introduce the nominal wage stickiness, the output of nondurables and durables decrease together and, as a result, total output also decreases. This result is robust to the degree of wage stickiness and to durable price stickiness. The share of borrowers also does not influence the main result.

Go to Top