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Financial Intermediaries and Monetary Economics
| Citations: | 63 - 1 self |
BibTeX
@MISC{Adrian_financialintermediaries,
author = {Tobias Adrian and Hyun Song Shin},
title = {Financial Intermediaries and Monetary Economics},
year = {}
}
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Abstract
We reconsider the role of nancial intermediaries in monetary economics. We explore the hypothesis that the nancial intermediary sector is the engine that drives the nancial cycle through the uctuations in the price of risk. In this framework, balance sheet quantities emerge as a key indicator of risk appetite and hence for the \risk-taking channel " of monetary policy. We document evidence that balance sheets of nancial intermediaries provide a window on the transmission of monetary policy through capital market conditions. Short-term interest rates are found to be important in in uencing the size of nancial intermediary balance sheets. Our ndings suggest that the traditional focus on the money stock for the conduct of monetary policy may have more modern counterparts, and suggest the importance of tracking balance sheet quantities for the conduct of monetary policy. This paper is a preliminary version of a chapter prepared for the Handbook of Monetary
Keyphrases
monetary policy monetary economics financial intermediary balance sheet quantity nancial intermediary traditional focus capital market condition balance sheet short-term interest rate preliminary version nancial intermediary balance sheet modern counterpart nancial cycle risk appetite risk-taking channel money stock nancial intermediary sector key indicator
