Bank-by-Bank Credit Ceilings: Issues and Experiences

32 Pages Posted: 15 Feb 2006

See all articles by Mitra Farahbaksh

Mitra Farahbaksh

affiliation not provided to SSRN

Gabriel Sensenbrenner

International Monetary Fund (IMF)

Date Written: June 1996

Abstract

Many central banks have abandoned credit ceilings in favor of monetary control frameworks based on indirect instruments. In the long run, ceilings limited competition, hampered the development of a money market, and caused disintermediation. Despite the many distortions associated with the use of credit ceilings, some countries continue to employ them, particularly during the transitional period before full reliance on indirect monetary instruments. The paper argues that the careful attention to design can help reduce distortions typically associated with the use of credit ceilings. It identifies a series of principles that may be followed in designing a system that can minimize those distortions.

JEL Classification: E52, E58

Suggested Citation

Farahbaksh, Mitra and Sensenbrenner, Gabriel, Bank-by-Bank Credit Ceilings: Issues and Experiences (June 1996). IMF Working Paper No. 96/63, Available at SSRN: https://ssrn.com/abstract=882900

Mitra Farahbaksh (Contact Author)

affiliation not provided to SSRN

No Address Available

Gabriel Sensenbrenner

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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