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Money, Liquidity, and Monetary Policy

14 Pages Posted: 22 Jan 2009  

Tobias Adrian

International Monetary Fund

Hyun Song Shin

Bank for International Settlements

Date Written: January 1, 2009

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: credit crisis, monetary policy

JEL Classification: G24, E50

Suggested Citation

Adrian, Tobias and Shin, Hyun Song, Money, Liquidity, and Monetary Policy (January 1, 2009). FRB of New York Staff Report No. 360. Available at SSRN: https://ssrn.com/abstract=1331004 or http://dx.doi.org/10.2139/ssrn.1331004

Tobias Adrian (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.tobiasadrian.com

Hyun Song Shin

Bank for International Settlements ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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