How do interest rates influence the supply of credit?
Less capitalized banks tend to be more restrictive when granting credit to small and medium-sized enterprises when interest rates rise. This is one of the main conclusions of the study "The Transmission of Monetary Policy to Credit Supply in the Euro Area" by Miguel García-Posada and Peter Paz.
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DISCLAIMER: The views expressed in this blog post are those of the author(s) and do not necessarily coincide with those of the Banco de España or the Eurosystem.