IMF paper says ECB can do more to fix broken transmission mechanism

Euro sign, Frankfurt

A working paper published by the International Monetary Fund (IMF) today has identified the credit channel as a major contributing factor to impaired monetary transmission in the eurozone.

In Fragmentation and Monetary Policy in the Euro Area, researchers Ali Al-Eyd and Pelin Berkmen find that the credit channel in the eurozone has been "undermined" by weak bank balance sheets, high funding costs, low demand as households rebuild their balance sheets and high rates of non-performing loans.


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