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Working Paper
The role of credit in post-stabilization consumption booms
This paper presents an empirical investigation of the role of credit in the post-stabilization consumption booms of Mexico, Chile, and Israel. Credit from the banking sector to the private sector expanded very rapidly following the stabilizations. I show that this increase in credit reduced the proportion of consumers that were liquidity constrained in the economy. This reduction in liquidity constraints could have helped to fuel the observed consumption booms. In addition, I show that the most important channels for the expansion in credit to consumers in Mexico are the rapid remonetization ...
Working Paper
Financial innovation and the speed of adjustment of money demand: evidence from Bolivia, Israel, and Venezuela
Traditional studies of money demand for both developed and less developed countries have shown that there are periods of "missing money," that is, there is consistent overprediction of real balances. This paper uses cointegration techniques to study the effects of financial innovation on the demand for real balances in Bolivia, Israel, and Venezuela. The results show that financial innovation can account for the instability of money demand observed in these countries. In particular, I find that the long run demand for real balances shifted down. In addition, I show that the speed at which ...
Working Paper
The monetary transmission mechanism in Mexico
An important question in macroeconomics has been how the transmission mechanism of monetary policy works. In particular, the question of whether there exists a credit channel for the transmission of monetary policy has been one of the central themes in the discussion of the effectiveness of monetary policy. If this channel exists, then shocks to credit markets, particularly to bank loans, can have real effects. This paper presents new evidence on the credit hypothesis for the case of Mexico after 1984. We present a simple variant of the open economy IS-LM model which includes a credit ...