Injections in economics are introductions of income into circular flow from sources outside households and businesses, such as additions to investment, government expenditure and exports.
["The Nature of the Economy," ''Reserve Bank of Australia,'' https://www.rba.gov.au/education/resources/delivery-notes/pdf/the-nature-of-economy.pdf. Retrieved 3 Oct. 2022.] When a central bank makes a short-term loan to a member institution, it is said to be injecting liquidity. In the United States, the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...
maintains a target
federal funds rate
In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an collateral (finance), uncollateralized basis ...
for banks to loan money overnight. If the lending banks are unwilling to offer enough credit at this rate, the central bank may step in and make loans itself through the
discount window
Discount may refer to:
Arts and entertainment
* Discount (band), punk rock band that formed in Vero Beach, Florida in 1995 and disbanded in 2000
* ''Discount'' (film), French comedy-drama film
* "Discounts" (song), 2020 single by American rapper C ...
. In this role, the central bank is operating as the
lender of last resort
In public finance, a lender of last resort (LOLR) is a financial entity, generally a central bank, that acts as the provider of liquidity to a financial institution which finds itself unable to obtain sufficient liquidity in the interbank ...
and is said to be injecting
liquidity
Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include:
* Market liquidity
In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quic ...
.
External links
Econobrowser.com What is a liquidity event
References
{{DEFAULTSORT:Injection (Economics)
Operations of central banks