This creates the conditions for the primary role of banks in their financial structure, since banks are especially experienced in screening and monitoring borrowers’ creditworthiness in order to address these information problems. The incidence of bank debt on financial debt is a bit more than 40 per cent in the euro area and one third in the US.
For two years in succession, the M3 money supply rose by about 8 per cent. Almost as if by magic, the rate of inflation also declined to below 10 per cent in 1993, and stayed in single- digits for the next four years. In 1996, the average rate of inflation was only 7.4 per cent, the lowest level for any calendar year since 1972.