Elasticity in the monetary system

Key takeaways

• Today's two-tier monetary system performs a crucial role: providing money in an elastic way through overdrafts and lines of credit in the face of uncertainty and unforeseen shocks.
• During the Covid-19 pandemic, such elasticity allowed central banks and commercial banks to provide a discretionary increase in the money supply to manage global shocks.
• In recent months, banks have expanded their loan commitments to sectors impacted by US tariffs in anticipation of client demand for working capital.