The Impact of Credit Market Sentiment Shocks
Böck M, Zörner TO (2024)
Publication Language: English
Publication Type: Journal article, Original article
Publication year: 2024
Journal
Book Volume: 56
Pages Range: 1645-1673
Journal Issue: 7
URI: https://onlinelibrary.wiley.com/doi/epdf/10.1111/jmcb.13109
DOI: 10.1111/jmcb.13109
Open Access Link: https://onlinelibrary.wiley.com/doi/10.1111/jmcb.13109
Abstract
This paper investigates the role of credit market sentiment and investor beliefs in credit cycle dynamics and their transmission to businesscycle fluctuations. Using U.S. data from 1968 to 2014, we find that credit market sentiment is indeed able to detect asymmetries in a small-scale macroeconomic model. An unexpected credit market sentiment shock has different impacts in an optimistic and pessimistic credit market environment. While an unexpected movement in the optimistic regime leads to a rather muted impact on output and credit, we find a significant negative impact on these variables in the pessimistic regime. The findings highlight the relevance of expectation formation mechanisms as a source of macroeconomic instability.
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Austria (AT)How to cite
APA:
Böck, M., & Zörner, T.O. (2024). The Impact of Credit Market Sentiment Shocks. Journal of Money, Credit and Banking, 56(7), 1645-1673. https://doi.org/10.1111/jmcb.13109
MLA:
Böck, Maximilian, and Thomas O. Zörner. "The Impact of Credit Market Sentiment Shocks." Journal of Money, Credit and Banking 56.7 (2024): 1645-1673.
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