Monetary Aggregates and the Central Bank’s Financial Stability Mandate

Hyun Jeong Kim (), Hyun Song Shin and Jaeho Yun ()
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Hyun Jeong Kim: Macroeconomics Team, Economic Research Institute, The Bank of Korea
Jaeho Yun: Ewha Womans University

No 2012-6, Working Papers from Economic Research Institute, Bank of Korea

Abstract: Money is the balance sheet counterpart to bank lending. As such, highly procyclical components of money reflect incremental bank lending that may reverse abruptly as financial conditions deteriorate. Components of monetary aggregates that correspond to cross-border banking sector flows depend sensitively on both domestic and global financial factors and display a procyclical pattern that may be utilized in constructing a set of indicators of the vulnerability of the financial system to crises. We illustrate our arguments by drawing on the experience of Korea and by presenting an empirical analysis of cross-border banking flows into “demand pull†and “supply push†components.

Keywords: Monetary aggregates; Financial stability; Procyclicality; Demand-pull factor; Supply-push factor (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-06-05
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Citations: View citations in EconPapers (10)

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