Monetary Transmission Mechanism - Lending Channel

Vratislav Izák

Politická ekonomie, 1998, vol. 1998, issue 6

Abstract: The Czech National Bank has through Repo rates effectively influenced the money market rates (PRIBOR). The strong cointegration has been also valid for the impact of PRIBOR rate on the interest rates on newly granted credits. The expected negative correlation between interest rates on the one side both investment and newly granted credits have been found. Industrial production and crown credits into industry have not been cointegrated. More detailed analysis of the credit structure in industry in 1997 shows the increasing ratio of credits in foreign currencies on the total credit volume. The potential efficiency of Czech monetary policy is limited due to unfavourable financial situation in Czech industrial enterprises. Under these circumstances not only the interest rates but credit availability at all have been important instruments and tools of monetary policy. The further increase of interest rates can evoke negative supply responses and paradoxically reinforce inflationary pressures.

Date: 1998
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DOI: 10.18267/j.polek.257

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