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Financial stability monitoring

Tobias Adrian (), Daniel M. Covitz and J. Nellie Liang
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Daniel M. Covitz: Board of Governors of the Federal Reserve System
J. Nellie Liang: Board of Governors of the Federal Reserve System

No 601, Staff Reports from Federal Reserve Bank of New York

Abstract: We present a forward-looking monitoring program to identify and track the sources of systemic risk over time and to facilitate the development of pre-emptive policies to promote financial stability. We offer a framework that distinguishes between shocks, which are difficult to prevent, and vulnerabilities that amplify shocks. Building on substantial research, we focus on leverage, maturity transformation, interconnectedness, complexity, and the pricing of risk as the primary vulnerabilities in the financial system. The monitoring program tracks these vulnerabilities in four areas: the banking sector, shadow banking, asset markets, and the nonfinancial sector. The framework also highlights the policy trade-off between reducing systemic risk and raising the cost of financial intermediation by taking pre-emptive actions to reduce vulnerabilities.

Keywords: financial stability; systemic risk (search for similar items in EconPapers)
JEL-codes: E58 G01 G23 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
Date: 2013, Revised 2014-06-01
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Related works:
Journal Article: Financial Stability Monitoring (2015) Downloads
Working Paper: Financial Stability Monitoring (2014) Downloads
Working Paper: Financial stability monitoring (2013) Downloads
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