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A Semiparametric Time Trend Varying Coefficients Model: With An Application to Evaluate Credit Rationing in U.S. Credit Market

Author

Listed:
  • Qi Gao

    (The school of Public Finance and Taxation, Southwestern University of Finance and Economics)

  • Jingping Gu

    (Department of Economics, University of Arkansas)

  • Paula Hernandez-Verme

    (Department of Economics & Finance, University of Guanajuato, UCEA-Campus Marfil)

Abstract

In this paper, we propose a new semiparametric varying coefficient model which extends the existing semi-parametric varying coefficient models to allow for a time trend regressor with smooth coefficient function. We propose to use the local linear method to estimate the coefficient functions and we provide the asymptotic theory to describe the asymptotic distribution of the local linear estimator. We present an application to evaluate credit rationing in the U.S. credit market. Using U.S. monthly data (1952.1-2008.1) and using inflation as the underlying state variable, we find that credit is not rationed for levels of inflation that are either very low or very high; and for the remaining values of inflation, we find that credit is rationed and the Mundell-Tobin effect holds.

Suggested Citation

  • Qi Gao & Jingping Gu & Paula Hernandez-Verme, 2012. "A Semiparametric Time Trend Varying Coefficients Model: With An Application to Evaluate Credit Rationing in U.S. Credit Market," Annals of Economics and Finance, Society for AEF, vol. 13(1), pages 189-210, May.
    • Handle: RePEc:cuf:journl:y:2012:v:13:i:1:gaoguhernandez-verme
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    References listed on IDEAS

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    Cited by:

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    2. Lu, Xun & Su, Liangjun, 2015. "Jackknife model averaging for quantile regressions," Journal of Econometrics, Elsevier, vol. 188(1), pages 40-58.
    3. Emilio Munene Gachoki, 2023. "The Impact of Financial Development on Inflation: Empirical Evidence from Kenya using the ARDL Approach," International Journal of Science and Business, IJSAB International, vol. 28(1), pages 147-160.

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