What is a Demand Loan?

Credit demand refers to the actual demand for over-consumption in the form of loans in the absence of recent payment capacity.

Credit demand

Right!

Credit demand refers to the actual demand for over-consumption in the form of loans in the absence of recent payment capacity.

For both developed and developing countries, international capital markets are an important source of conditional international solvency. However, the international capital markets do not treat developed and developing countries equally, but they are biased. The reason why the international capital market has such a bias is determined by its special market supply and demand structure. Demand for private international credit in developed and developing countries is not exactly the same. Generally speaking, due to the urgent need for external resources in developing countries and the serious shortage of foreign exchange, their credit needs should be greater than those in developed countries. This is indeed the case. Statistics clearly show that the amount of loans and international bonds issued by developing countries from international commercial banks is far lower than that of developed countries, while the interest rates paid are much higher than those of developed countries. This means that under the same conditions, the credit demand of developing countries is greater than that of developed countries, even at the same level of interest rates. Conversely, in order for developing countries to obtain the same amount of credit as developed countries, they must pay higher interest rates than developed countries. Therefore, in the image, the credit demand curve (LDC) of the developing countries falls to the right of the developed country curve (DC) (see Figure 1, where i represents the interest rate and Q represents the amount of credit).

By sector, credit needs are divided into government financing needs, corporate borrowing needs, household consumer borrowing needs, and borrowing needs of other financial institutions; according to content, credit needs mainly include the demand for money for planned purchases of goods and the use of money as an idle asset Money demand, while the money supply mainly comes from borrowing from banks and the public holding money balances.

1 Peng Gang, Peng Qiang. Yu Xue. China Economic Publishing House, 2009.01.

2 Junjun Yang. International Reserve Research. Shanghai University of Finance and Economics Press, April 1998.

3 Sun Boyin. Endogenous logic of money supply. China Finance Press, July 2003, 1st edition. ^[1]