Monetary tightening, as is well known, works by restraining demand. In as much as the fiscal stance is supportive of demand, the monetary stance has had to be more aggressive than otherwise. For monetary policy to be more supportive of growth, it will be necessary for fiscal consolidation to take root more firmly. 45.
Thus far, studies have shown that the very favourable financing conditions can keep afloat unprofitable firms which, if interest rates were higher, would have to exit the market. 19 As a result, this would mean valuable resources being stuck in unproductive uses. However, current research is also warning that low interest rates could be a potential feeding ground for higher market concentration.