On the relevance of credit market structure to monetary policy

Sharon K. Blei

No 2007-03, Supervisory Policy Analysis Working Papers from Federal Reserve Bank of St. Louis

Abstract: Credit affects the economy via various channels: its price, collateral requirements and the extent of rationing. Would the intensity of monetary transmission be affected by the market structure of the credit industry? Using a spatial competition framework I demonstrate how credit market structure can affect the transmission of monetary policy changes into real activity via the volume of credit. The paper also points that monetary tightening may render lending unprofitable and consequently beget a credit crunch; the extent of credit market robustness to contractive monetary policy is shown to depend on its structural characteristics.

Keywords: Credit; Monetary policy (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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