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Recent credit dynamics across advanced economies: Drivers and effects

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  • Lucia Quaglietti

Abstract

Financing conditions have tightened sharply since 2022 across OECD countries, reflecting the rapid increase of central banks’ policy rates. Credit conditions have worsened alongside, especially in the euro area, where credit provided by banks has been expanding at the slowest pace since the euro area sovereign debt crisis. Empirical estimates obtained for Germany, France, Italy, the United Kingdom and the United States suggest that the credit deceleration reflects a combination of tighter credit supply and falling credit demand, with the latter playing a predominant role in shaping credit conditions in the euro area. Credit supply has progressively dried up in all countries, and although there have been few signs of a severe and widespread credit shortage of the type seen in the global financial crisis, the negative effect on economic activity is being felt in several countries. Bank lending rates have started to edge down, pointing to a completed pass-through of past monetary policy tightening. However, tight credit conditions could weigh on activity through 2024, due to the long lags in the transmission of credit shocks. Credit demand could also weaken further, including in the event of a sharp tightening of labour markets or a swift repricing in asset prices.

Suggested Citation

  • Lucia Quaglietti, 2024. "Recent credit dynamics across advanced economies: Drivers and effects," OECD Economics Department Working Papers 1826, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1826-en
    DOI: 10.1787/458e2f58-en
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    More about this item

    Keywords

    credit drivers; credit effects; labour markets; monetary policy;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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