The central bank can increase availability of credit by

Asked by admin @ 13/08/2021 in Economy viewed by 336 People

Answered by admin @ 13/08/2021

Can Central Bank increase the availability of credit by raising the reverse repo rate?

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4 ANSWERS

John Biesterfeldt, World's Foremost Authority

Answered Apr 1, 2018 · Author has 320 answers and 132.8k answer views

Central banks don’t limit the availability of credit, they only affect the interest rate. That is how central banks affect the amount of borrowing - by making interest rates more (or less) attractive. But loans are always available at the prevailing interest rate.

Banks create loans by expanding their balance sheet; they don’t lend out pre-existing money. There is no operational limit to how much credit banks can create, they just need to stay within regulations (capital requirements and reserve requirements, if any).

It is possible for central banks to put a hard limit on the amount of reserves, thereby also putting a hard limit on the amount of credit that banks can create, but by doing so they lose control of interest rates (banks bid up available reserves, so interest rates go up, etc.) So central banks now choose to supply whatever reserves banks need to satisfy the demand for loans, and keep control of the overnight rate instead.

Take any three non-collinear points a b c and draw triangle a,b,c. through each vertex of the triangle draw a line parallel to the opposite side using ruler and compass

Asked by wiki @ 15/11/2022 in Mathematics viewed by 1463 persons

The central bank can increase availability of credit by

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