Credit Easing
Credit easing is a form of monetary policy used by central banks to increase the availability of credit in the economy. It is a type of unconventional monetary policy, which is used when traditional monetary policy tools such as interest rate cuts are not effective. Credit easing involves the central bank buying assets from banks, such as government bonds, corporate bonds, and mortgage-backed securities, in order to increase the amount of money available for lending. This increases the liquidity of the banking system and makes it easier for banks to lend money to businesses and consumers.
History of Credit Easing
Credit easing was first used by the Bank of Japan in the early 2000s as a response to the Japanese banking crisis. The Bank of Japan used credit easing to purchase government bonds and other assets from banks in order to increase the amount of money available for lending. This policy was successful in increasing the availability of credit in the economy and helped to stimulate economic growth.
In the wake of the 2008 financial crisis, the US Federal Reserve used credit easing as part of its quantitative easing program. The Federal Reserve purchased large amounts of government bonds and mortgage-backed securities in order to increase the amount of money available for lending. This policy was successful in increasing the availability of credit in the economy and helped to stimulate economic growth.
Comparison of Credit Easing
| Policy | Effect |
|---|---|
| Interest Rate Cuts | Reduces cost of borrowing |
| Credit Easing | Increases availability of credit |
Summary
Credit easing is a form of monetary policy used by central banks to increase the availability of credit in the economy. It is a type of unconventional monetary policy, which is used when traditional monetary policy tools such as interest rate cuts are not effective. Credit easing involves the central bank buying assets from banks, such as government bonds, corporate bonds, and mortgage-backed securities, in order to increase the amount of money available for lending. This increases the liquidity of the banking system and makes it easier for banks to lend money to businesses and consumers. For more information about credit easing, please visit the websites of the Federal Reserve, the Bank of Japan, and other central banks.
See Also
- Quantitative Easing
- Monetary Policy
- Interest Rate
- Fiscal Policy
- Central Bank
- Government Bond
- Corporate Bond
- Mortgage-Backed Security
- Liquidity
- Banking System
