Since many private enterprises use shares as collaterals to borrow money from banks, it will be harder for them to secure loans when their share prices plunge. Meanwhile, in this case, commercial banks will ask them to increase collaterals. Therefore, it can be concluded that the negative effects of the three financing channels can affect and reinforce each other.
Axel A Weber: Forecasting in Eurosystem central banks – overview and challenges Speech by Professor Axel A Weber, President of the Deutsche Bundesbank, at the Bundesbank Spring Conference, Eltville, 5 May 2006. References to the speech can be found on the Deutsche Bundesbank’s website.