Can Financial Innovation Help to Explain the Reduced Volatility of Economic Activity
By Karen E. Dynan, Douglas W. Elmendorf, Daniel E. Sichel. 2005
401 citations recorded by the source corpus.
The stabilization of economic activity in the mid 1980s has received considerable attention. Research has focused primarily on the role played by milder economic shocks, improved inventory management, and better monetary policy. This paper explores another potential explanation: financial innovation. Examples of such innovation include developments in lending practices and loan markets that have enhanced the ability of households and firms to borrow and changes in government policy such as the demise of Regulation Q. We employ a variety of simple empirical techniques to identify links between the observed moderation in economic activity and the influence of financial innovation on consumer spending, housing investment, and business fixed investment. Our results suggest that financial innovation should be added to the list of likely contributors to the mid-1980s stabilization.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/a5079173b46ff6b06664d1aeb96c7acfe5a21361
How researchers see this paper
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In Economics and Econometrics
- John V. Duca
- J. Muellbauer
- Anthony Murphy
- Marek Jarociński
- Frank Smets
- P. Mistrulli
- C. K. Sørensen
- J. Aron
In Finance
- John V. Duca
- Anthony Murphy
- J. Muellbauer
- P. Mistrulli
- Silvia Magri
- C. K. Sørensen
- J. Aron
- Frank Smets
Citations in the corpus
- Macroeconomics and Volatility: Data, Models, and Estimation (2010, neutral): “Other mechanisms put forward have included …nancial innovation (Dynan, Elmendorf, and Sichel, 2006) and, in an well-cited study by Clarida, Galí, and Gertler (2000), changes in monetary policy.”
- Cecchetti , Mohanty and Zampolli The real effects of debt The real effects of debt (2011, neutral): “Dynan et al (2006) focus on the role of financial innovation.”
- Has the Fed Been a Failure (2012, neutral): “…See, among many other works on the topic, McConnell and Perez-Quiros (2000), Ahmed et al. (2004), Alcala and Sancho (2004), Irvine and Schuh (2005), Dynan et al. (2006), Sims and Zha (2006), Arias et al. (2007), Leduc and Sill (2007), Davis and Kahn (2008), Jaimovich and Siu (2009), Liu et al.…”