The Contribution Of Administrative Credit Controls TO Greek Industrial Sector Capital Asset Formation

Abstract

This article analyses the effects of Selective Credit Policies (S.C.P.s), pursued by greek monetary authorities over the period 1968-1987, on industrial business behaviour. Selective Credit Policies comprise the exogenous determination of the volume and structure of bank lending, as well as of the levels and term structure of interest rates. Business behavior as reflected in decisions affecting investment in plant and equipment, on the one hand, and liquid assets, on the other. Liquid assets include inventories, credit to customers and cash accounts.

The conclusion of this study is that the S.C.P.s, although might have played some positive role in channeling long-term funds to industrial firms, they did not succeed in making any considerable contribution to capital asset formation. Conversely, the impact of investment inducing fiscal policies was proved to much stronger. Additionally, the combination of centrally administered nominal interest rates and high inflation rates that prevailed in the period under review, seriously limited any success of S.C.P.s in achieving the goals of promotion investment activity and the growth of industrial output.