Credit growth in the euro zone: Either too fast or too slow

When we look at lending to the private sector in the euro zone in the past , we see two types of periods: Periods of very rapid credit growth (1996-2000, 2005-2008), but which ended in financial crises; Periods of negative, zero or very slow credit growth (2009-2016), which coincided with abnormally weak growth in the euro zone. This shows that monetary policy and macroprudential policy have not properly regulated credit growth in the euro zone. These two policies should become more restrictive when credit grows too fast and more expansionary when it stagnates, using all available instruments (interest rates, quantitative easing, banks’ prudential ratios, loan-to-value ratios, etc.).