Figure 2
Panel (a): Credit to Inflation. The title at the top reads: Local Projection: Credit to Inflation. The vertical axis is labeled “Response of inflation to credit impulse” and ranges from negative 0.05 to 0.10 in increments of 0.05 units. The horizontal axis is labeled “Horizon (years)” and ranges from 1 to 5 in increments of 1 year. At the bottom, the legend includes “u b or l b” shown as green vertical bars and “beta” shown as an orange solid line. The orange “beta” line starts slightly above 0 at horizon 1, remains near 0 at horizon 2, increases to around 0.04 at horizon 3, decreases slightly to about 0.03 at horizon 4, and declines toward 0.01 to end at horizon 5. The green vertical bars “u b or l b” intervals extend above and below each beta value, with wider intervals at horizons 1 and 2 and narrower intervals around horizons 3 and 4. A dashed horizontal line marks zero response. Panel (b): Credit to Investment (G F C F growth). The title at the top reads: Local Projection: Credit to Investment. The vertical axis is labeled “Response of G F C F growth to credit impulse” and ranges from negative 4 to 4 in increments of 2 units. The horizontal axis is labeled “Horizon (years)” and ranges from 1 to 5 in increments of 1 year. At the bottom, the legend includes “u b or l b” shown as green vertical bars and “beta” shown as an orange solid line. The orange “beta” line starts above 1 at horizon 1, drops below negative 1 at horizon 2, increases toward negative values near horizon 3, crosses near 0 at horizon 4, and rises above 1 to end at horizon 5. The green vertical bars “u b or l b” intervals are wide across all horizons, extending both above and below the beta values, with the largest spread around horizons 3 and 2. A dashed horizontal line marks zero response. Note: All numerical data values are approximated.Local projection responses of inflation and investment to a credit impulse. Notes: Each panel reports local projection (LP) coefficients from regressions of the form Xi,t + h = αi + γt + βh CIi,t + θZi,t + ɛi,t + h, where CIi,t is the credit impulse and Zi,t includes the full baseline controls. The solid orange line (beta) plots the point estimates βh for horizons h = 1, …, 5. The green vertical bars (ub/lb) denote the 95% confidence intervals based on robust standard errors clustered at the country level. The dashed horizontal line marks zero response