Liquidity, monetary policy, and financial cycles
Tobias Adrian () and
Hyun Song Shin
Current Issues in Economics and Finance, 2008, vol. 14, issue Jan
A close look at how financial intermediaries manage their balance sheets suggests that these institutions raise their leverage during asset price booms and lower it during downturns - pro-cyclical actions that tend to exaggerate the fluctuations of the financial cycle. The authors of this study argue that the growth rate of aggregate balance sheets may be the most fitting measure of liquidity in a market-based financial system. Moreover, the authors show a strong correlation between balance sheet growth and the easing and tightening of monetary policy.
Keywords: Intermediation (Finance); Liquidity (Economics); Monetary policy; Business cycles; Asset pricing (search for similar items in EconPapers)
References: Add references at CitEc
Citations View citations in EconPapers (55) Track citations by RSS feed
Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/rese ... t_issues/ci14-1.html (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:fip:fednci:y:2008:i:jan:n:v.14no.1
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in Current Issues in Economics and Finance from Federal Reserve Bank of New York Contact information at EDIRC.
Series data maintained by Amy Farber ().