Bank-By-Bank Credit Ceilings: Issues and Experiences

Mitra Farahbaksh and Gabriel Sensenbrenner

No 1996/063, IMF Working Papers from International Monetary Fund

Abstract: Many central banks have abandoned credit ceilings in favor of monetary control frameworks based on indirect instruments. In the long run, ceilings limited competition, hampered the development of a money market, and caused disintermediation. Despite the many distortions associated with the use of credit ceilings, some countries continue to employ them, particularly during the transitional period before full reliance on indirect monetary instruments. The paper argues that the careful attention to design can help reduce distortions typically associated with the use of credit ceilings. It identifies a series of principles that may be followed in designing a system that can minimize those distortions.

Keywords: WP; credit ceiling; bank; ceiling; break; rediscount quota; outstanding share; credit right; credit authorization; noncompliant bank; credit portfolio; credit financing; credit facility; credit growth; foreign currency; credit supply; Credit ceilings; Credit; Bank credit; Reserve requirements; Commercial banks; Global (search for similar items in EconPapers)
Pages: 32
Date: 1996-06-01
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Citations: View citations in EconPapers (6)

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