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.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS or its member central banks.
