This relationship is somewhat nebulous but very important and should be viewed seriously with its significance as well as inherent limitations in mind. Secondly, excessive leveraging in any conditions of financial markets is a source of potential instability. Since leveraging is influenced by the cost of financing, the decisions affecting the cost and availability of credit do influence aggregate demand conditions.
Even if the source of financing is not bank funding, the interest rate conditions in the market definitely influence the opportunity cost of even internal resources of firms. The effectiveness of interest rate and exchange rate channels, no doubt, depends upon the depth and vibrancy of the debt and foreign exchange markets.