One issue on which there has been considerable debate is whether low interest rates are doing as much to promote economic growth since the financial crisis as they would have before the financial crisis – whether the interest rate channel of transmission for monetary policy has been attenuated. I agree with those who think this channel has been partially blocked.
Individuals who have impaired credit histories, have been unemployed, or hold underwater mortgages are experiencing great difficulty gaining access to credit, whether to buy or refinance a home, finance a small business, or support spending for other needs. Even those with good, but not stellar, credit histories and sufficient income are facing capacity constraints in the mortgage market.