How does the central bank's operation in the money market affect the supply of commercial paper?

The central bank plays a crucial role in the money market by controlling the supply of money, which can affect the availability of commercial paper. Commercial paper is a short-term debt instrument that companies use to meet their immediate financing needs. When the central bank lowers interest rates or injects money into the economy, it makes borrowing cheaper for businesses, leading to an increase in the issuance of commercial paper. For example, if a company needs to pay suppliers quickly and can borrow at a lower rate, it is more likely to issue commercial paper to raise the necessary funds. Conversely, if the central bank raises interest rates or reduces the money supply, borrowing becomes more expensive, which can lead to a decrease in the issuance of commercial paper.