New Study Reveals How Monetary Policy Impacts Borrowing and Investment
Monetary policy can affect borrowing and lending differently. In a study on monetary economies with private credit, researchers found that policies influencing the liquidity premium on credit can impact borrowing costs and investment levels. However, trying to ease borrowing constraints can lead to inefficient trading. By using various liquidity management tools like interest payments on money and capital requirements, it is possible to achieve an efficient allocation of resources.