Procyclicality and Monetary Aggregates

28 Pages Posted: 28 Feb 2011

See all articles by Hyun Song Shin

Hyun Song Shin

Bank for International Settlements (BIS)

Kwanho Shin

Korea University

Date Written: February 2011

Abstract

Financial intermediaries borrow in order to lend. When credit is increasing rapidly, the traditional deposit funding (core liabilities) is supplemented with other funding (non-core liabilities). We explore the hypothesis that monetary aggregates reflect the size of non-core and core liabilities and hence convey information on the stage of the financial cycle. In emerging economies with open capital markets, non-core liabilities of the banking system take the form of short-term foreign exchange liabilities, increasing the vulnerability to the outbreak of "twin crises" where a liquidity crisis is compounded by a currency crisis.

Suggested Citation

Shin, Hyun Song and Shin, Kwanho, Procyclicality and Monetary Aggregates (February 2011). NBER Working Paper No. w16836. Available at SSRN: https://ssrn.com/abstract=1770389

Hyun Song Shin (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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

Kwanho Shin

Korea University ( email )

1 Anam-dong 5 ka
Sunbuk-Ku, Department of Economics
Seoul 136-701
Korea
82-2-3290-2220 (Phone)
82-2-3290-2719 (Fax)

HOME PAGE: econ.korea.ac.kr/~khshin

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