Non-Credit Money to Fight Poverty
While finance plays an important role in supporting economic growth, financial institutions have a limited reach in low income countries. This is because underdeveloped financial infrastructures, inadequate collateral, weak contract enforcement, and low participation in payments systems expose banks to high liquidity and credit risks. Circuit analysis shows how banks enable a monetary production economy to function and grow by creating and allocating money through lending to support demand and production. When lending is hindered by structural impediments, economic growth is constrained.
KeywordsMonetary Policy Central Bank Credit Risk Liquidity Risk Reserve Requirement
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