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On the relevance of credit market structure to monetary policy

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  • Sharon K. Blei

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.

Suggested Citation

  • Sharon K. Blei, 2007. "On the relevance of credit market structure to monetary policy," Supervisory Policy Analysis Working Papers 2007-03, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlsp:2007-03
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    Cited by:

    1. Asrat Tsegaye & Syden Mishi, 2012. "The Role of Banks in Monetary Policy Transmission in South Africa," Working Papers 295, Economic Research Southern Africa.
    2. Patrick Mumbi Chileshe & Olusegun Ayodele Akanbi, 2016. "The effect of Bank competition on the effectiveness of the Interest Rate Channel of Monetary Policy Transmission," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(3), pages 10-32, September.

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    Keywords

    Credit; Monetary policy;

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