Money, liquidity, and monetary policy

Tobias Adrian and Hyun Song Shin

No 360, Staff Reports from Federal Reserve Bank of New York

Abstract: In a market-based financial system, banking and capital market developments are inseparable, and funding conditions are closely tied to fluctuations in the leverage of market-based financial intermediaries. Offering a window on liquidity, the balance sheet growth of broker-dealers provides a sense of the availability of credit. Contractions of broker-dealer balance sheets have tended to precede declines in real economic growth, even before the current turmoil. For this reason, balance sheet quantities of market-based financial intermediaries are important macroeconomic state variables for the conduct of monetary policy.

Keywords: Intermediation (Finance); Liquidity (Economics); Brokers; Economic indicators; Financial institutions (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (201)

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Journal Article: Money, Liquidity, and Monetary Policy (2009)
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