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How Do Small Business Finance and Monetary Policy Interact?, No. 20-11

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How Do Small Business Finance and Monetary Policy Interact?, No. 20-11

DATE: October 2020

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ABSTRACT: Economists at the Richmond Fed, the University of Virginia, UC Irvine, and Purdue analyze how monetary policy affects the creation of lending relationships for small businesses and vice versa. Bank loans are an important funding source for small businesses, but many small businesses have no access to them. The researchers develop a search model that analyzes the supply and demand for lending relationships. Understanding the key role these relationships play in the economy can help central banks develop optimal monetary policy responses to crises like the Great Recession and COVID-19.

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Phelps, Hailey , Wong, Russell and Federal Reserve Bank of Richmond. "How Do Small Business Finance and Monetary Policy Interact?, No. 20-11," Economic Brief (October 2020). https://fraser.stlouisfed.org/title/6034/item/598089, accessed on May 16, 2022.

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