Title : The Effects of Credit Supply Shocks on Durable and Nondurable Consumption
Authors : Kwanghwan Kim(Yonsei University), Sukgee Choi(BOK)

This paper shows the role of wage stickiness in the transmission of credit supply shock in a two-sector New Keynesian model with a collateral constraints. In the vector autoregression(VAR) analysis, durable goods and nondurable goods comove in response to a credit supply shock. However, in a two-sector New Keynesian model with flexible wage, the output of nondurables decreases, while the output of durables and total output increase  in response to a negative credit supply shock(LTV ratio tightening). Therefore, the comovement problem in two-sector New Keynesian model arises to a credit supply shock. If we introduce the nominal wage stickiness, the output of nondurables and durables decrease together and, as a result, total output also decreases. This result is robust to the degree of wage stickiness and to durable price stickiness. The share of borrowers also does not influence the main result.