Governments can safeguard economy against supply shocks, says National Bank of Denmark paper
A National Bank of Denmark paper published on January 20 says both the financial system structure and the extent of government intervention during banking crises play a key role in the significance of the real effects of credit-supply shocks.
Kim Abildgren, the paper's author, uses a series of structural vector autoregressive models to examine the real effects of credit-supply shocks in Denmark over the past 90 years. The author notes that a negative credit-supply shock during a recession – a
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