Impact of Loan Contract Characteristics on Monetary Transmission and Consumer Rent (Presentation Slides)

This paper postulates that loan contract characteristics, such as maturity of loans and period of rate fixation, play a major role in shaping how swiftly lending rates react to monetary shocks and for explaining diverging speed of transmission of monetary policy across Euro area countries. This is particularly the case between the so called “peripheral” countries and core countries, two groups of countries which happen to have similar loan contract characteristics within each group but very different contract characteristics between the two groups. The paper also discusses how, following a monetary shock, loan contract characteristics may influence, to a large extent, rent redistribution between borrowers and lenders but also within borrowers and between countries