ABSTRACT
This chapter presents an analysis of the non-monetarist theoretical underpinnings of the credit availability doctrine and tests some of the implications of the theory as applied to the commercial loan market. Equations explaining the commercial loan rate and the value of commercial loans are examined. The data used are for the time period 1960–89, with the data divided into periods of monetary tightness and easiness. The effects of credit availability are hypothesized to be more prevalent in periods of monetary tightness and a structural shift may occur in the two equations between the two time periods. To test this hypothesis, regressions are run for periods of both monetary tightness and easiness, and a Bayesian procedure is used to test for a parameter shift. In section 2 of this chapter, the theory of credit availability is examined. In section 3, the model (equations) is developed, and in section 4, the empirical results are presented.
