Interest Rate Rigidity As Cause of Current Recession and the Ways to Decrease It

Despite ultra-easy monetary policy in US, Eurozone and Japan, lending interest rate remains higher than expected profitability. However minimal lending interest rate in advanced economies diminishes the Central Banks' ability to stimulate economic growth. Paper argues that high interest rate is caused by interest rate rigidity, and to decrease interest rate rigidity paper suggests a shift from debt-based to trade-based financing where banks extend trade credit rather than loan, in particular, banks purchase goods, on the client's request, from a third party and resell it to client in installments at an agreed mark-up