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7 results

Macroprudential Policy and Practice
  • Edited by Paul Mizen, Margarita Rubio, Philip Turner
  • Published online:
    09 August 2018
    Print publication:
    23 August 2018
  • Macroprudential policy is perhaps the most important new development in central bank policymaking circles since the global financial crisis, and reliance on such policies has continued to spread. The crisis, which showed the limits of conventional monetary policy as a tool to deal with financial stability, forced a wide-ranging rethink of economic policies, their interactions and their repercussions. It has led to new forms of intervention, of regulation and of supervisory practice. Macroprudential regulation is now one of the most important topics in modern macroeconomics, because it concerns measures put in place to reduce the risks and costs of the instability caused by financial crises. Written by senior figures from the worlds of academia and banking, this volume combines theoretical approaches with hard evidence of the policy's achievements in many countries. It is the first in-depth analysis of macroprudential instruments for policymakers, banks and economists.

  • 9 - Empirical evidence for credit effects in the transmission mechanism of the United Kingdom

  • Edited by Lavan Mahadeva, Bank of England, Peter Sinclair, Bank of England
  • Book:
    Monetary Transmission in Diverse Economies
    Published online:
    22 September 2009
    Print publication:
    17 October 2002, pp 167-190

  • Summary

    Introduction

    This paper addresses the question of whether ‘credit’ contains information additional to that available in ‘money’. There has been a long tradition of modelling monetary conditions in the economy by focusing on the demand for money (i.e. banks' liabilities), but monetary policy is implemented via changes in short-term interest rates. Changes to interest rates influence the demand for loans, and it is through the loan market that aggregate spending is affected, at least to some degree. This issue has been addressed in theoretical terms in the ‘credit channel’ literature (see Bernanke and Gertler, 1995), and two variations on the credit channel story have been identified: a balance sheet channel and a bank lending channel. The first links the determinants of lending to observable characteristics of the financial health of the borrowing firms; the second suggests that some influences on lending flows originate within the banking system.

    Banks typically have an ongoing relationship with the households and corporations to which they lend, and they use information about a company's financial position obtained through this banking relationship to determine the loan facility they will offer. Factors that are easily monitored, such as cash flow, financial wealth, previous loan payments history and outstanding debt, will affect the ability of a company to obtain loans, as will the value of collateral that a firm is able to offer.