In a neoclassical growth model, an interest rate fall caused by a drop in the home country’s idiosyncratic risk premium leads to higher consumption (through the wealth and intertemporal substitution effects) and stimulates investment (reflecting a permanently lower user cost of capital).
BIS Review 69/2004  1  Research by Federal Reserve staff shows that fair value estimates for bank loans can vary greatly, depending on the valuation inputs and methodology used. For example, observed market rates for corporate bonds and syndicated loans within lower-rated categories have varied by as much as 200 to 500 basis points.