Have credit card services become important to monetary aggregation? An application of sign restricted Bayesian VAR

Figures & data

Figure 1. Log of real GDP (left) and growth rate of real GDP (right) with mixed-frequency VAR using credit-augmented divisia.

Figure 2. VAR forecasting using credit-augmented divisia M2I.

Table 1. Sign restrictions with use of credit-augmented divisia M2I.

	Demand	Supply	Monetary	Credit
rGDP	+	+	-	+
Prices	+	-	-
Policy Rate	+		+
Spread			-	-
Credit	-	-		+
CM2I	+			+

Figure 3. 1,000-rotations of impulse responses to demand shock (upper-left), supply shock (upper-right), monetary policy shock (down-left), credit supply shock (down-right) with data including credit-augmented divisia M2I.

Figure 4. Impulse responses to demand shock (upper-left), supply shock (upper-right), monetary policy shock (down-left), and credit supply shock (down-right) with data set including credit-augmented divisia M2I.

Table 2. Median target forecast error variance decomposition, credit-augmented divisia M2I.

	Horizon	Demand	Supply	Monetary	Credit	Residual
	1	0.058	0.189	0.304	0.031	0.418
	4	0.095	0.125	0.284	0.139	0.356
rGDP	12	0.068	0.159	0.281	0.266	0.226
	36	0.085	0.304	0.171	0.165	0.275
	72	0.152	0.194	0.270	0.133	0.251
	1	0.225	0.526	0.019	0.057	0.173
	4	0.195	0.449	0.054	0.140	0.162
Price	12	0.179	0.374	0.191	0.140	0.117
	36	0.270	0.247	0.228	0.103	0.153
	72	0.281	0.189	0.280	0.085	0.165
	1	0.258	0.127	0.439	0.166	0.011
	4	0.340	0.203	0.370	0.044	0.042
SFFR	12	0.154	0.486	0.309	0.024	0.027
	36	0.099	0.564	0.231	0.041	0.064
	72	0.094	0.555	0.209	0.046	0.095
	1	0.000	0.049	0.262	0.302	0.387
	4	0.011	0.065	0.237	0.260	0.426
Spread	12	0.013	0.065	0.257	0.210	0.455
	36	0.019	0.113	0.254	0.188	0.426
	72	0.021	0.114	0.252	0.187	0.426
	1	0.060	0.079	0.299	0.162	0.400
	4	0.203	0.172	0.200	0.092	0.333
Credit	12	0.248	0.193	0.159	0.064	0.337
	36	0.162	0.193	0.236	0.100	0.309
	72	0.191	0.146	0.286	0.092	0.286
	1	0.180	0.003	0.057	0.341	0.420
	4	0.102	0.018	0.108	0.161	0.612
CM2I	12	0.179	0.011	0.241	0.060	0.509
	36	0.265	0.008	0.440	0.057	0.231
	72	0.296	0.007	0.428	0.044	0.226

Figure 5. Historical decomposition of real GDP, CPI, and credit-augmented divisia.

Figure 6. The first row displays behavior of supply shock and growth of CPI, with credit-augmented divisia M2I on the left and simple sum M2 on the right. The second row displays the behavior of credit supply shock and growth of monetary aggregates, with credit-augmented divisia M2I on the left and simple sum M2 on the right.

Table A1. Data information for back-casting.

Variable	Description	Source
rGDP	Log of real GDP (Quarterly)	FRED
IPI	Log of Industrial Production Index	FRED
CONEXP	Log of Consumption Expenditure	FRED
CPI	Log of CPI	FRED
CAPUTI	Log of Capacity Utilization	FRED
SSFR	Shadow Federal Funds Rate	Board of Governors of the Federal System (Wu & Xia, 2016)
UNEMP	Unemployment Rate	FRED
CM2I	Log of Credit-Augmented Divisia M2 Inside Money	CFS
SM2	Log of Simple Sum M2	FRED

Table A2. Data information for VAR-Sign restriction.

Variable	Description	Source
rGDP	Log of real GDP	FRED
CPI	Log of CPI	FRED
SSFR	Shadow Federal Funds Rate	Board of Governors of the Federal System (Wu & Xia, 2016)
SPREAD	Bank Prime Loan Rate − 3 M T Bill	FRED
CREDIT	Ratio of Total Consumer Credit to rGDP	FRED
CM2I	Log of Credit-Augmented Divisia M2 Inside Money	CFS
SM2	Log of Simple Sum M2	FRED

Table A3. Sign restriction using simple sum M2.

	Demand	Supply	Monetary	Credit
rGDP	+	+	-	+
Prices	+	-	-
Policy Rate	+		+
Spread			-	-
Credit	-	-		+
SM2	+		-

Table A4. Median target forecast error variance decomposition using simple sum M2.

	Horizon	Demand	Supply	Monetary	Credit	Residual
	1	0.035	0.219	0.142	0.000	0.603
	4	0.085	0.172	0.247	0.008	0.489
rGDP	12	0.088	0.244	0.413	0.019	0.236
	36	0.140	0.332	0.246	0.103	0.180
	72	0.191	0.243	0.273	0.161	0.133
	1	0.112	0.438	0.119	0.110	0.222
	4	0.106	0.295	0.180	0.139	0.280
Price	12	0.100	0.225	0.258	0.127	0.290
	36	0.232	0.163	0.197	0.167	0.241
	72	0.255	0.131	0.197	0.188	0.228
	1	0.121	0.004	0.501	0.012	0.363
	4	0.299	0.019	0.415	0.009	0.259
SFFR	12	0.226	0.219	0.320	0.028	0.208
	36	0.127	0.425	0.181	0.039	0.228
	72	0.115	0.441	0.177	0.038	0.229
	1	0.185	0.109	0.104	0.454	0.148
	4	0.184	0.119	0.135	0.398	0.164
Spread	12	0.149	0.103	0.226	0.337	0.185
	36	0.136	0.121	0.216	0.315	0.212
	72	0.136	0.122	0.216	0.313	0.212
	1	0.065	0.003	0.111	0.368	0.453
	4	0.197	0.019	0.175	0.237	0.373
Credit	12	0.275	0.023	0.249	0.152	0.300
	36	0.174	0.146	0.350	0.141	0.189
	72	0.209	0.131	0.333	0.179	0.149
	1	0.264	0.023	0.405	0.217	0.092
	4	0.166	0.032	0.206	0.361	0.235
SM2	12	0.211	0.030	0.149	0.377	0.233
	36	0.276	0.011	0.277	0.278	0.158
	72	0.323	0.006	0.232	0.291	0.148

Figure B1. Log of real GDP (left), growth rate of real GDP (right). Mixed-frequency VAR using simple sum M2.

Figure B2. VAR forecasting using simple sum M2.

Figure B3. 1,000-rotations of impulse responses to demand shock (up-left), supply shock (up-right), monetary policy shock (down-left), credit supply shock (down-right) with data set including SM2.

Figure B4. Impulse responses to demand shock (up-left), supply shock (up-right), monetary policy shock (down-left), and credit supply shock (down-right) with data including SM2.

Figure B5. Historical decomposition of real GDP, CPI, and simple sum M2.

Figure C1. Impulse responses to demand shock (upper-left), supply shock (upper-right), monetary policy shock (down-left), and credit supply shock (down-right) with data set including credit-augmented divisia M2I, lag extension.

Figure C2. Impulse responses to demand shock (upper-left), supply shock (upper-right), monetary policy shock (down-left), and credit supply shock (down-right) with data set including credit-augmented divisia M2I, imposing the restrictions in the first period after impact.

Wu, J. C., & Xia, F. D. (2016). Measuring the macroeconomic impact of monetary policy at the zero lower bound. Journal of Money, Credit and Banking, 48(2–3), 253–291. https://doi.org/10.1111/jmcb.12300

 Web of Science ®Google Scholar