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Variable rate corporate loans strengthen transmission of monetary policy
There are considerable differences between countries of the euro area in the prevalence of variable rate bank loans. According to recent research by the authors, the extent to which bank loans are variable rate loans influences how the key ECB interest rates affect the demand for corporate loans.
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Impact of ECB’s policy rate changes on corporate loan rates varies strongly across countries
A considerable proportion of the corporate loan stock in the euro area consists of loans with a fixed – rather than a variable – rate of interest. However, this proportion differs by industry and even more so by country. In Germany and France, the majority of corporate loans are tied to a fixed rate. In Finland, the proportion of fixed rate loans is small.
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Monetary policy measures taken during pandemic revived euro area economy
During the COVID crisis, the Eurosystem has purchased securities on the markets and granted banks loans on favourable terms. These measures have helped avoid a deep recession and deflation in the euro area.