Modelling credit in the transmission mechanism of the United Kingdom |
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| Affiliation: | 1. City University Business School, London, UK;2. Department of Economics, University of Nottingham, University Park, Nottingham NG7 2RD, UK;1. Faculty of Economics, Fukuoka University, 8-19-1, Nanakuma, Jonan-ku, Fukuoka, 814-0180, Japan;2. Faculty of International Politics and Economics, Nishogakusha University, 6-16 Sanbancho, Chiyoda-ku, Tokyo, 102-8336, Japan;1. Department of Thermal Science and Energy Engineering, University of Science and Technology of China, Jinzhai Road 96, Hefei 230026, China;2. Department of Mechanical Engineering, The Hong Kong University of Science and Technology, Hong Kong Special Administrative Region;1. Tianjin Key Laboratory of Indoor Air Environmental Quality Control, Key Laboratory of Efficient Utilization of Low and Medium Grade Energy, School of Environmental Science and Engineering, Tianjin University, China;2. Entrepreneurship, Commercialisation and Innovation Centre (ECIC), Adelaide 5005, Australia;3. School of Architecture & Built Environment, The University of Adelaide, Adelaide 5005, Australia;4. School of Environment, Beijing Normal University, Beijing 100875, China;5. School of Natural and Built Environments, University of South Australia, Adelaide 5000, Australia;1. Faculty of Science, Agronomy Department, Hydraulics Division, University 20 Août 1955 SKIKDA, Route EL HADAIK, BP 26, Skikda, Algeria;2. Ilia State University, Faculty of Natural Sciences and Engineering, 0162 Tbilisi, Georgia;1. Faculty of Agronomy, University of Kragujevac, Cara Dušana 34, Čačak, Serbia;2. Faculty of Technology and Metallurgy, University of Belgrade, Karnegijeva 4, Belgrade, Serbia |
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| Abstract: | Studies have focused heavily on money in the transmission mechanism of monetary policy. In this article we explore the empirical importance of credit. The paper provides a framework in which to analyse the balance sheets of, and financial flows between, different sectors of the UK economy, and an econometric model of the interactions between non-financial firms, households and credit offered by banks and non-bank financial intermediaries. The paper also provides a dynamic structural model of bank and building society credit, money and decisions to consume and invest and then adds credit from non-bank financial intermediaries. Our bottom line is that credit is an important part of the transmission process of UK monetary policy. |
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