Economics, Econometrics and Finance
4 years ago

New study reveals how central bank credit policies impact liquidity provision.

SSRN Electronic Journal
Alternative Central Bank Credit Policies for Liquidity Provision in a Model of Payments
David C. Mills

Paper Summary

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The study looks at different ways central banks can provide money to address a shortage of funds. By comparing charging interest on loans with requiring collateral, the researchers found that charging interest can lead to better outcomes than using collateral when collateral has a cost.