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Title:Financial intermediation, asset prices, and macroeconomic dynamics PDF Logo
Authors:Adrian, Tobias
Moench, Emanuel
Shin, Hyun Song
Issue Date:2010
Series/Report no.:Staff Report, Federal Reserve Bank of New York 422
Abstract:Fluctuations in the aggregate balance sheets of financial intermediaries provide a window on the joint determination of asset prices and macroeconomic aggregates. We document that financial intermediary balance sheets contain strong predictive power for future excess returns on a broad set of equity, corporate, and Treasury bond portfolios. We also show that the same intermediary variables that predict excess returns forecast real economic activity and various measures of inflation. Our findings point to the importance of financing frictions in macroeconomic dynamics and provide quantitative guidance for preemptive macroprudential and monetary policies.
Subjects:Return predictability
financial intermediation
macroeconomic dynamics
macroprudential policy
JEL:G10
G12
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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