Financial Stability and Monetary Policy: Need for International Surveillance

Gary Hufbauer and Danxia Xie

Journal of International Economic Law, 2010, vol. 13, issue 3, 939-953

Abstract: In this article, we propose a new monetary framework that defines a broader set of assets, De Facto Money (DFM), as the benchmark for improving financial stability. DFM is defined as traditional monetary aggregates plus other liquid assets such as stocks and bonds. Empirical evidence for the USA, other Organisation for Economic Co-operation and Development countries, and a few emerging countries lends strong support for the connection between exceptionally fast growth of DFM and subsequent financial instability. We recommend several potential policy instruments to implement the new monetary framework. Due to cross-country spillovers from national financial crises, we suggest that international surveillance will be necessary to monitor DFM and thus the underlying conditions for financial stability in major countries. We argue that the International Monetary Fund is the ideal institution to carry out this task in terms of its reputation and expertise. Oxford University Press 2010, all rights reserved, Oxford University Press.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1093/jiel/jgq035 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jieclw:v:13:y:2010:i:3:p:939-953

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Journal of International Economic Law is currently edited by Kathleen Claussen, Sergio Puig and Michael Waibel

More articles in Journal of International Economic Law from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().