Credit Characteristics and the Monetary Policy Transmission Mechanism in Fourteen Industrial Countries: Facts, Conjectures and Some Econometric Evidence

Abstract

This paper examines in detail the characteristics of credit to the non-government sector, including both interest and non-interest terms, in fourteen industrial countries and considers its potential implications for the transmission mechanism of monetary policy. Three findings merit particular attention. First, the share of securities in total credit is comparatively high in Anglo-Saxon countries. Second, most Anglo-Saxon countries are characterised by a relatively high share of adjustable rate credit. This is due primarily to the widespread use of adjustable rate mortgages by households. Outside the Anglo-Saxon group, the main exception is Italy; inside it, the United States. Third, the share of loans backed by real estate collateral appears to be comparatively high in most Anglo-Saxon countries. Elsewhere, it is very high in Sweden and Switzerland. There are also indications that the share is relatively high in Japan. To varying degrees, the above characteristics should be expected to amplify the impact of monetary policy on economic activity. Their relevance is broadly consistent with the cross-country pattern of results of simulations of national central bank models.

This paper is closely based on Borio (1995). The views expressed are those of the author and do not necessarily reflect those of the BIS. I would like to thank Philippe Hainaut and also Gerd Schnabel for invaluable statistical assistance and the staff of the national central banks contributing to this work for their kind cooperation.