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Its findings underline concerns that the greater concentration of mega firms in economies, especially in the midst of the digital revolution, mean these outsized cash-rich businesses are also less sensitive to credit markets and bank lending – key conduits through which central bank policies affect overall activity.
The implications are potentially huge.
If growth rates are significantly higher in the years ahead and inflation keeps rising well above central bank targets for years, will central banks be forced into more severe tightening and interest rate rises than usual to cool it all down?
Or indeed if the aging, developed world reverts to its decade-long path of “secular stagnation” shortly after bouncing back from the coronavirus pandemic, how hard will central banks have to push to prevent a relapse into deflation?
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LONDON (Reuters) - If central banks’ policies of zero interest rates and trillions of dollars of bond buying struggled to lift growth and inflation for over a decade, tighter monetary policy may be equally inefficient in reining them in.
Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo
At least that’s what research by International Monetary Fund economists suggests, arguing the increasing dominance of fewer and larger companies potentially undermines the impact of central bank policies on overall economic activity and prices.
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