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funding


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The conversion of government debt from short-term forms, or bills, to long-term forms, or bonds. This is regarded as a form of monetary policy, since bills are more liquid than bonds, and form part of the banks' liquid reserves, whereas bonds do not. Funding tends to raise long-term interest rates, as bonds have to be sold, and lower short-term interest rates, as bills become scarcer.

Subjects: Economics.


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