But they also reached much lower levels of unemployment before this happened than they would have expected based on historical estimates of the NAIRU. Accordingly, official estimates of these countries' NAIRUs have declined (Graph 3).
Consequently, credit is being contained although it is virtually impossible to disentangle the contribution of supply restrictions versus weak demand in explaining the average decline of credit to the economy. In the markets there is the suspicion that banks’ balance-sheets need more repair with full recognition of potential losses and that is also affecting the lending behaviour of banks.