Stocks or Flows? New Thinking About Monetary Transmission Through the Lending Channel

The lending channel is conventionally understood to transmit monetary policy through new loans. We postulate that the lending channel may also operate via the stock of existing loans. In this context, this paper documents a wide diversity in borrowers' features, loan features and price developments across euro area Member States. Better understanding the individual and combined implications of these features is of the outmost importance for being able to conduct an effective monetary policy in the euro area. Significant differences in these factors across euro area Member States can distort a homogeneous transmission of the single monetary policy