Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60885
Authors: 
Adrian, Tobias
Estrella, Arturo
Year of Publication: 
2010
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 398
Abstract: 
We reconsider the role of financial intermediaries in monetary economics. We explore the hypothesis that financial intermediaries drive the business cycle by way of their role in determining the price of risk. In this framework, balance sheet quantities emerge as a key indicator of risk appetite and hence of the 'risk-taking channel' of monetary policy. We document evidence that the balance sheets of financial intermediaries reflect the transmission of monetary policy through capital market conditions. We find short-term interest rates to be important in influencing the size of financial intermediary balance sheets. Our findings suggest that the traditional focus on the money stock for the conduct of monetary policy may have more modern counterparts, and we suggest the importance of tracking balance sheet quantities for the conduct of monetary policy.
Subjects: 
Financial intermediation
monetary policy
risk-taking channel
JEL: 
E00
E02
G28
Document Type: 
Working Paper

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