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Elasticity in the monetary system

Author

Listed:
  • Ryan Niladri Banerjee
  • Jon Frost
  • Michael Chui
  • Jose Maria Vidal Pastor

Abstract

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.

Suggested Citation

  • Ryan Niladri Banerjee & Jon Frost & Michael Chui & Jose Maria Vidal Pastor, 2025. "Elasticity in the monetary system," BIS Bulletins 101, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:101
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    References listed on IDEAS

    as
    1. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    2. JaeBin Ahn & Mary Amiti & David E. Weinstein, 2011. "Trade Finance and the Great Trade Collapse," American Economic Review, American Economic Association, vol. 101(3), pages 298-302, May.
    3. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    4. Frederic Boissay & Nikhil Patel & Hyun Song Shin, 2020. "Trade credit, trade finance, and the Covid-19 Crisis," BIS Bulletins 24, Bank for International Settlements.
    5. Viral V Acharya & Robert Engle & Maximilian Jager & Sascha Steffen, 2024. "Why Did Bank Stocks Crash during COVID-19?," The Review of Financial Studies, Society for Financial Studies, vol. 37(9), pages 2627-2684.
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