Bank Revolving Credit as a Channel of Monetary Policy

Mujtaba Zia, Jennifer Logan



This paper investigates the implication of bank revolving credit in the form of credit card loans as a channel of monetary policy targeting the federal funds rate since 1980. Credit cards have become increasingly popular and a necessity for many transactions and purchases in the United States. The revolving credit nature of credit card loans makes them an instant tool for consumer loans that can facilitate consumption. Using instrumental variable and two-stage least squares (2SLS) methodology, we analyze the implication of credit card loans to modern monetary policy that targets interest rates.


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