Recessions which have been triggered by debt-financed booms tend to be more protracted and deeper than normal recessions (Reinhard and Rogoff 2014; Schularick, Jordà and Taylor 2013). Debt levels and the financial sector Reducing debt to sustainable levels has thus been a key goal of post-crisis financial sector reforms. Nevertheless, progress in deleveraging has been slow, and debt levels remain high.
Central bank money has some unique properties that likely ensure it a comparative advantage relative to interbank deposits. First, central bank balances carry no default risk. No private bank or other financial firm can match this. Second, central banks typically provide access to liquidity through a discount window or other standing facility, especially important in the event of a serious liquidity problem.