financial stability essay

Publication
Global Financial Development Report

Back to Key Terms Explained

Financial stability

There are numerous definitions of financial stability. Most of them have in common that financial stability is about the absence of system-wide episodes in which the financial system fails to function (crises). It is also about resilience of financial systems to stress.

A stable financial system is capable of efficiently allocating resources, assessing and managing financial risks, maintaining employment levels close to the economy’s natural rate, and eliminating relative price movements of real or financial assets that will affect monetary stability or employment levels. A financial system is in a range of stability when it dissipates financial imbalances that arise endogenously or as a result of significant adverse and unforeseen events. In stability, the system will absorb the shocks primarily via self-corrective mechanisms, preventing adverse events from having a disruptive effect on the real economy or on other financial systems. Financial stability is paramount for economic growth, as most transactions in the real economy are made through the financial system.

The true value of financial stability is best illustrated in its absence, in periods of financial instability. During these periods, banks are reluctant to finance profitable projects, asset prices deviate excessively from their intrinsic values, and payments may not arrive on time. Major instability can lead to bank runs, hyperinflation, or a stock market crash. It can severely shake confidence in the financial and economic system.

Firm-level stability measures

A common measure of stability at the level of individual institutions is the z-score. It explicitly compares buffers (capitalization and returns) with risk (volatility of returns) to measure a bank’s solvency risk. The z-score is defined as z ≡ (k+µ)/σ, where k is equity capital as percent of assets, µ is return as percent of assets, and σ is standard deviation of return on assets as a proxy for return volatility. The popularity of the z-score stems from the fact that it has a clear (negative) relationship to the probability of a financial institution’s insolvency, that is, the probability that the value of its assets becomes lower than the value of its debt. A higher z-score therefore implies a lower probability of insolvency. Papers that used the z-score for analysis bank stability include Boyd and Runkle (1993); Beck, Demirgüç-Kunt, Levine (2007); Demirgüç-Kunt, Detragiache, and Tressel (2008); Laeven and Levine (2009); Čihák and Hesse (2010).

The z-score has several limitations as a measure of financial stability. Perhaps the most important limitation is that the z-scores are based purely on accounting data. They are thus only as good as the underlying accounting and auditing framework. If financial institutions are able to smooth out the reported data, the z-score may provide an overly positive assessment of the financial institutions’ stability. Also, the z-score looks at each financial institution separately, potentially overlooking the risk that a default in one financial institution may cause loss to other financial institutions in the system. An advantage of the z-score is that it can be also used for institutions for which more sophisticated, market based data are not available. Also, the z-scores allow comparing the risk of default in different groups of institutions, which may differ in their ownership or objectives, but face the risk of insolvency.

Other approaches to measuring institution-level stability are based on the Merton model. It is routinely used to ascertain a firm’s ability to meet its financial obligations and gauge the overall possibility of default. The Merton model (also called the asset value model) treats an institution’s equity as a call option on its held assets, taking into account the volatility of those assets. Put-call parity is used to price the value of the “put,” which is represented by the firm's credit risk. So, the model measures the value of the firm’s assets (weighting for volatility) at the time that the debtholders will “exercise their put option” by expecting repayment. The model defines default as when the value of a firm’s liabilities exceeds that of its assets (in different iterations of the model, the asset/liability level required to reach default is set at a different threshold). The Merton model can calculate the probability of credit default for the firm.

Merton’s model has been modified in subsequent research to capture a wider array of financial activity using credit default swap data. For example, it is part of the KMV model that Moody’s uses to both calculate the probability of credit default and as part of their credit risk management system. The Distance to Default (DD) is another market-based measure of corporate default risk based on Merton’s model. It measures both solvency risk and liquidity risk at the firm level.

Systemic stability measures

To measure systemic stability, a number of studies attempt to aggregate firm-level stability measures (z-score and distance to default) into a system-wide evaluation of stability, by averaging or by weighting each measure by the institution’s relative size. The shortcoming of these aggregate measures is that they do not take into account the interconnectedness of financial institutions; that is, that one institution’s failure can be contagious. The First-to-Default probability, or the probability of observing one default among a number of institutions, has been proposed as a measure of systemic risk for large financial institutions. It uses risk-neutral default probabilities from credit default swap spreads. The probability, unlike distance-to-default measures, recognizes that defaults among a number of institutions can be connected. However, studies focusing on probabilities of default tend to overlook the fact that a large institution failing causes bigger ripples than a small one. Another assessment of financial system stability is Systemic Expected Shortfall (SES), which measures each institution’s individual contribution to systemic risk. SES takes the individual taking leverage and risk-taking into account and measures the externalities from the banking sector to the real economy when these institutions fail. The model is especially good at identifying which institutions are systemically relevant and would have the largest effects, if they fail, on the wider economy. One drawback of the SES method is that it is difficult to determine when the systemically-important institutions are likely to fail.

In further research, the retrospective SES measure was extended to be somewhat predictive. The predictive measure is SRISK. SRISK evaluates the expected capital shortfall for a firm if there is another crisis. To calculate this predictive systemic risk measure, one must first find the Long-Run Marginal Expected Shortfal (LRMES), which measures the relation between a firm’s equity returns and the returns of the broader market (estimated using asymmetric volatility, correlation, and copula). The model estimates the drop in equity value of the firm if the aggregate market falls more than 40 percent in a six-month window to determine how much capital is needed during the simulated crisis in order to achieve an 8 percent capital to asset value ratio. SRISK% measures the firm’s percentage of total financial sector capital shortfall. A high SRISK% simultaneously indicates the biggest losers and contributors to the hypothetical crisis. One of the assumptions of the SES indicator is that a firm is “systemically risky” if it is especially likely to face a capital shortage when the financial sector is weak overall.

Another gauge of financial stability is the distribution of systemic loss, which attempts to fill some of the gaps of the previously-discussed measures. This combines three key elements: each individual institution’s probability of default, the size of loss given default, and the “contagious” nature of defaults across the institutions due to their interconnectedness.

There is also a range of indicators of financial soundness. These include the ratio of regulatory capital to risk-weighted assets and the ratio nonperforming loans to total gross loans. These are reported as part of the “financial soundness indicators” (fsi.imf.org). Variables such as the nonperforming loan ratios may be better known than the z-score, but they are also known to be lagging indicators of soundness (Čihák and Schaeck (2010).

Another alternative indicator of financial instability is “excessive” credit growth, with the emphasis on excessive. A well-developing financial sector is likely to grow. But very rapid growth in credit is one of the most robust common factors associated with banking crises (Demirgüc-Kunt and Detragiache 1997, Kaminsky and Reinhart 1999). Indeed, about 75 percent of credit booms in emerging markets end in banking crises. The credit growth measure also has pros and cons: Although it is easy to measure credit growth, it is difficult to assess ex-ante whether the growth is excessive.

For financial markets, the most commonly used proxy variable for stability is market volatility. Another proxy is the skewness of stock returns, because a market with a more negative skewed distribution of stock returns is likely to deliver large negative returns, and likely to be prone to less stability. Another variable is vulnerability to earnings manipulation, which is derived from certain characteristics of information reported in the financial statements of companies that can be indicative of manipulation. It is defined as the percentage of firms listed on the stock exchange that are susceptible to such manipulation. In the United States, France, and most other high-income economies, less than 10 percent of firms have issues concerning earnings manipulation; in Zimbabwe, in contrast, almost all firms may experience manipulation of their accounting statements. In Turkey, the number is close to 40 percent. Other variables approximating volatility in the stock market are the price-to-earnings ratio and duration, which is a refined version of the price-to-earnings ratio that takes into account factors such as long-term growth and interest rates.

Feedback Survey

Thank you for agreeing to provide feedback on the new version of worldbank.org; your response will help us to improve our website.

Thank you for participating in this survey! Your feedback is very helpful to us as we work to improve the site functionality on worldbank.org.

Essays on Financial Stability: Lessons for Macroprudential Supervision and Regulation

--> Whyte, Kemar (2019) Essays on Financial Stability: Lessons for Macroprudential Supervision and Regulation. PhD thesis, University of Sheffield.

Banking regulation and, in particular, macroprudential regulation have gained significant interest since the crisis that began in 2007. At the centre of banking regulation is a deep-rooted concern that the economic and social costs of systemic crises are significant and their implications are far-reaching. Banks play a number of crucial roles in the functioning of any economy. However, the banking system in which they operate is inherently fragile, and after many painful experiences, regulators are quite convinced that this is particularly true during economic downturns. As such, it is important to explore and assess prudential policies that could be designed or improved to prevent banking crises from occurring and to make the system more resilient. This thesis uses panel micro-econometric methods to explore factors that could have an impact on financial stability and suggests policies that could be used to address them. The first essay empirically analyses how the capital buffer held by banks behave over the business cycle after financial factors have been accounted for. Using a large panel of banks for the period 2000-2014, it documents evidence that capital buffers behave more pro-cyclical than previously found in the literature. Furthermore, it also shows that this relationship is more pronounced for large commercial banks where access to bail-out and equity markets incentivise an increase in credit exposure and reduced capital reserves accordingly. The second essay notes that a common feature within a lot of corporate income tax systems is the long-standing bias towards debt finance. That is, the cost of debt has been deductible as an expenditure when calculating taxable profits. An unintended consequence of this tax distortion is the creation of under-capitalized firms - raising default risk in the process. Using a difference-in-differences technique, this essay demonstrates that with a more equal treatment of equity and debt, banks capitalisation significantly improves. The essay takes advantage of the exogenous variation in the fiscal treatment of equity and debt as a result of the introduction of an Allowance for Corporate Equity (ACE) system in Italy, to identify whether an ACE positively impacts banks’ capital structure. The results demonstrate that a move to an unbiased corporate tax environment leads to better capitalised banks, fuelled by equity growth rather than a reduction in lending activities. The change also triggers a decrease in the risk-taking of ex-ante low capitalised banks. The third essay analyses the impact of liquid asset holdings on bank profitability. Using a large sample of banks, the essay documents evidence of a non-linear relationship between additional liquid asset holdings and bank profitability. That is, banks’ profitability is improved with the holding of some liquid assets. However, evidence suggests that there is a point at which holding further liquid assets diminishes profitability. The essay also finds that growth in credit and asset prices is more important for bank profitability than output growth, suggesting that bank returns respond to the financial and not the business cycle. Another important finding of this essay is that long-term interest rates tend to increase bank profitability, whilst short-term rates tend to lower bank profits - via increasing funding costs. These findings are homogeneous across countries with different development status as these results appear consistent for advanced and emerging market economies. Overall, the findings from this thesis provide important implications for regulators seeking to provide stability and resilience to the financial system. They provide further evidence that supports the call for the use of countercyclical capital buffers, but more importantly, they highlight the need for a more rigid approach to the setting of the countercyclical capital buffer rate. The thesis also suggests that an allowance for corporate equity system that eliminates or significantly reduces the tax-induced distortions in banks, might be worth considering as a macroprudential policy tool that targets capital standard. Finally, it also highlights the importance of finding the right balance between policies geared toward mitigating liquidity risk and maintaining bank profitability.

Supervisors:	Montagnoli, Alberto and Mouratidis, Konstantinos
Awarding institution:	University of Sheffield
Academic Units:
Identification Number/EthosID:	uk.bl.ethos.778820
Depositing User:	Mr Kemar Whyte
Date Deposited:	17 Jun 2019 08:43
Last Modified:	25 Sep 2019 20:08

--> Thesis -->

Filename: Thesis_KWhyte.pdf

Description: Thesis

Embargo Date:

You do not need to contact us to get a copy of this thesis. Please use the 'Download' link(s) above to get a copy. You can contact us about this thesis . If you need to make a general enquiry, please see the Contact us page.

Über bonndoc
bonndoc Startseite
Fakultäten der Universität Bonn
Rechts- und Staatswissenschaftliche Fakultät
E-Dissertationen
Dokumentanzeige

Essays on Financial Stability

Art der Hochschulschrift

Prüfungsdatum, datum der veröffentlichung, erstgutachter, zweitgutachter, beteiligte institutionen, zitierbare links.

Handle: https://hdl.handle.net/20.500.11811/6371
URN: https://nbn-resolving.org/urn:nbn:de:hbz:5-39633

Klassifikation (DDC)

Zitiervorschlag

Die folgenden Nutzungsbestimmungen sind mit dieser Ressource verbunden:

Stöbern

Home Toggle navigation FR Toggle Search Search the site Search About us About us Head office Regional offices History Archives Background materials Photos and videos Accessibility Contact us Corporate governance Board of Directors Governing Council and Senior Management Governance documents Educational resources The Economy, Plain and Simple Explainers Financial education resources Careers Take a central role at the Bank of Canada with our current opportunities and scholarships.

Essays on Financial Stability

The four essays published here provide a useful overview for anyone interested in understanding the issues and policy environment surrounding financial system stability.

The first three essays consider different aspects of the question, What is financial stability/instability? The first essay, by John Chant, Special Adviser at the Bank in 2001–02, considers how financial instability differs from other kinds of instability, how it is different from the volatility normally associated with a well-functioning financial system, and how instability can be propagated within the financial system and to the real economy.

In the second essay, Alexandra Lai tackles some of the problems raised by Chant; in particular, the difficulty of understanding the nature of crises. She reviews a range of theoretical approaches that have been pursued in order to understand the potential instabilities in domestic financial systems.

In his essay, Mark Illing provides four case studies of episodes often thought of as periods of financial stress or crisis—the stock market crash of October 1987, the near-collapse of Long-Term Capital Management in 1998, the failures of the Canadian Commercial Bank and the Northland Bank in 1985, and the Bank of New York's 1985 computer problem.

The fourth essay, by Fred Daniel, provides a context for more general discussions of the role of policy in promoting financial stability, by providing an overview of the current institutional arrangements that condition financial behaviour in Canada and how the Bank of Canada interacts with other agencies who share responsibility for financial stability.

DOI: https://doi.org/10.34989/tr-95

We use cookies to help us keep improving this website.

, ( ), and

from

The four essays published here provide a useful overview for anyone interested in understanding the issues and policy environment surrounding financial system stability. The first three essays consider different aspects of the question, What is financial stability/instability? The first essay, by John Chant, Special Adviser at the Bank in 2001–02, considers how financial instability differs from other kinds of instability, how it is different from the volatility normally associated with a well-functioning financial system, and how instability can be propagated within the financial system and to the real economy. In the second essay, Alexandra Lai tackles some of the problems raised by Chant; in particular, the difficulty of understanding the nature of crises. She reviews a range of theoretical approaches that have been pursued in order to understand the potential instabilities in domestic financial systems. In his essay, Mark Illing provides four case studies of episodes often thought of as periods of financial stress or crisis—the stock market crash of October 1987, the near-collapse of Long-Term Capital Management in 1998, the failures of the Canadian Commercial Bank and the Northland Bank in 1985, and the Bank of New York’s 1985 computer problem. The fourth essay, by Fred Daniel, provides a context for more general discussions of the role of policy in promoting financial stability, by providing an overview of the current institutional arrangements that condition financial behaviour in Canada and how the Bank of Canada interacts with other agencies who share responsibility for financial stability.

; (search for similar items in EconPapers)
(search for similar items in EconPapers)
130 pages
2003
this item is included in , and

(10)

(external link)

This item may be available elsewhere in EconPapers: for items with the same title.

BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

for this paper

in Technical Reports from 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at .
Bibliographic data for series maintained by ( ).

Oxford Thesis Collection
CC0 version of this metadata

Essays in financial stability under financial frictions

This thesis is a collection of essays where I explore and extend the study of the role of financial frictions for the determination of asset prices, financial stability, and economic resilience. The frictions included in the analysis are individual and aggregate uncertainty, agent heterogeneity, money, liquidity and default. The first essay is an empirical study that motivates my research objectives. This work starts with the exploration of the role of liquidity on asset prices, specifically ...

Email this record

Please enter the email address that the record information will be sent to.

Please add any additional information to be included within the email.

Cite this record

Chicago style, access document.

THESIS01 (pdf, 2.9MB)

Why is the content I wish to access not available via ORA?

Content may be unavailable for the following four reasons.

Version unsuitable We have not obtained a suitable full-text for a given research output. See the versions advice for more information.
Recently completed Sometimes content is held in ORA but is unavailable for a fixed period of time to comply with the policies and wishes of rights holders.
Permissions All content made available in ORA should comply with relevant rights, such as copyright. See the copyright guide for more information.
Clearance Some thesis volumes scanned as part of the digitisation scheme funded by Dr Leonard Polonsky are currently unavailable due to sensitive material or uncleared third-party copyright content. We are attempting to contact authors whose theses are affected.

Alternative access to the full-text

Request a copy.

We require your email address in order to let you know the outcome of your request.

Provide a statement outlining the basis of your request for the information of the author.

Please note any files released to you as part of your request are subject to the terms and conditions of use for the Oxford University Research Archive unless explicitly stated otherwise by the author.

Contributors

Bibliographic details, item description, terms of use, views and downloads.

If you are the owner of this record, you can report an update to it here: Report update to this record

Report an update

We require your email address in order to let you know the outcome of your enquiry.

Browse Econ Literature

Working papers
Software components
Book chapters
JEL classification

More features

Subscribe to new research

RePEc Biblio

Author registration.

Economics Virtual Seminar Calendar NEW!

Essays on Financial Stability

Author & abstract
3 References
10 Citations
Most related
Related works & more

Corrections

Alexandra Lai
Mark Illing
Fred Daniel

Suggested Citation

Download full text from publisher, references listed on ideas.

Follow serials, authors, keywords & more

Public profiles for Economics researchers

Various research rankings in Economics

RePEc Genealogy

Who was a student of whom, using RePEc

Curated articles & papers on economics topics

Upload your paper to be listed on RePEc and IDEAS

New papers by email

Subscribe to new additions to RePEc

EconAcademics

Blog aggregator for economics research

Cases of plagiarism in Economics

About RePEc

Initiative for open bibliographies in Economics

News about RePEc

Questions about IDEAS and RePEc

RePEc volunteers

Participating archives

Publishers indexing in RePEc

Privacy statement

Found an error or omission?

Opportunities to help RePEc

Get papers listed

Have your research listed on RePEc

Open a RePEc archive

Have your institution's/publisher's output listed on RePEc

Get RePEc data

Use data assembled by RePEc

You are using an outdated browser. Upgrade your browser today or install Google Chrome Frame to better experience this site.

IMF at a Glance
Surveillance
Capacity Development
IMF Factsheets List
IMF Members
IMF Financial Statements
IMF Senior Officials
IMF in History
Archives of the IMF
Job Opportunities
Climate Change
Fiscal Policies
Income Inequality

Flagship Publications

Other publications.

World Economic Outlook

Global Financial Stability Report

Fiscal Monitor

External Sector Report
Staff Discussion Notes
Working Papers
IMF Research Perspectives
Economic Review
Global Housing Watch
Commodity Prices
Commodities Data Portal
IMF Researchers
Annual Research Conference
Other IMF Events

IMF reports and publications by country

Regional offices.

IMF Resident Representative Offices
IMF Regional Reports
IMF and Europe
IMF Members' Quotas and Voting Power, and Board of Governors
IMF Regional Office for Asia and the Pacific
IMF Capacity Development Office in Thailand (CDOT)
IMF Regional Office in Central America, Panama, and the Dominican Republic
Eastern Caribbean Currency Union (ECCU)
IMF Europe Office in Paris and Brussels
IMF Office in the Pacific Islands
How We Work
IMF Training
Digital Training Catalog
Online Learning
Our Partners
Country Stories
Technical Assistance Reports
High-Level Summary Technical Assistance Reports
Strategy and Policies

For Journalists

Country Focus
Chart of the Week
Communiqués
Mission Concluding Statements
Press Releases
Statements at Donor Meetings
Transcripts
Views & Commentaries
Article IV Consultations
Financial Sector Assessment Program (FSAP)
Seminars, Conferences, & Other Events
E-mail Notification

Press Center

The IMF Press Center is a password-protected site for working journalists.

Login or Register
Information of interest
About the IMF
Conferences
Press briefings
Special Features
Middle East and Central Asia
Economic Outlook
Annual and spring meetings
Most Recent
Most Popular
IMF Data Portal
World Economic Outlook Databases
AI Preparedness Index
Climate Change Indicators Dashboard
IMF Finances
International Financial Statistics
Financial Access Survey
Government Finance Statistics
G20 Data Gaps Initiative
Currency Composition of Official Foreign Exchange Reserves
Publications Advanced Search
IMF eLibrary
IMF Bookstore
Publications Newsletter
Essential Reading Guides
Regional Economic Reports
Country Reports
Departmental Papers
Policy Papers
Selected Issues Papers
All Staff Notes Series
Analytical Notes
Fintech Notes
How-To Notes
Staff Climate Notes

Safeguarding Financial Stability amid High Inflation and Geopolitical Risks

Key highlights, chapters in the report, financial stability risks have increased rapidly as the resilience of the global financial system has been tested by higher inflation and fragmentation risks..

Chapter 1 analyzes the recent turmoil in the banking sector and the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities since the global financial crisis. The emergence of stress in financial markets complicates the task of central banks at a time when inflationary pressures are proving to be more persistent than anticipated. Smaller and riskier emerging markets continue to confront worsening debt sustainability trends. Chapter 2 examines nonbank financial intermediaries (NBFIs) and the vulnerabilities that can emerge from elevated leverage, liquidity mismatches, and high levels of interconnectedness. Tools to tackle the financial stability consequences of NBFI stress are proposed, underscoring that direct access to central bank liquidity could prove necessary in times of stress, but implementing appropriate guardrails is paramount. Chapter 3 analyzes the effect of geopolitical tensions on financial fragmentation and explores their implications for financial stability—including through potential capital flow reversals, disruptions of cross-border payments, impact on banks’ funding costs, profitability, and credit provision, and more limited opportunities for international risk diversification. Based on the findings, it draws policy recommendations aimed at strengthening financial oversight, building larger buffers, and enhancing international cooperation.

Chapter 1: A Financial System Tested by Higher Inflation and Interest Rates

Financial stability risks have increased rapidly as the resilience of the global financial system has faced a number of tests. Recent turmoil in the banking sector is a powerful reminder of the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities since the global financial crisis . The emergence of stress in financial markets complicates the task of central banks at a time when inflationary pressures are proving to be more persistent than anticipated . Large emerging markets have so far avoided adverse spillovers, but smaller and riskier economies continue to confront worsening debt sustainability trends.

Chapter 2: Nonbank Financial Intermediaries: Vulnerabilities amid Tighter Financial Conditions

Nonbank financial intermediaries (NBFIs) play a key role in the global financial system, enhancing access to credit and supporting economic growth. Also, NBFIs’ financial vulnerabilities might have increased in the past, amid low interest rates. Case studies presented in this chapter show that NBFI stress tends to emerge with elevated leverage, liquidity mismatches, and high levels of interconnectedness that often spill over to emerging markets. In the current environment of high inflation and tighter financial conditions, central banks can face complex and challenging trade-offs during market stress, between addressing financial stability risks and achieving price stability objectives. Policymakers need appropriate tools to tackle the financial stability consequences of NBFI stress. NBFI direct access to central bank liquidity could prove necessary in times of stress, but implementing appropriate guardrails is paramount.

Chapter 3: Geopolitics and Financial Fragmentation: Implications for Macro-Financial Stability

Rising geopolitical tensions among major economies have intensified concerns about global economic and financial fragmentation, which could have potentially important implications for global financial stability. Fragmentation induced by geopolitical tensions could affect the cross-border allocation of capital, international payment systems, and asset prices. This could pose macro-financial stability risks by increasing banks’ funding costs, reducing their profitability, and lowering the provision of credit to the private sector. Greater financial fragmentation could also exacerbate capital flow and macro-financial volatility by limiting international risk diversification. Policymakers need to be aware of potential financial stability risks associated with a rise in geopolitical tensions and assess and quantify geopolitical shock transmission to financial institutions. Financial institutions may need to hold adequate capital and liquidity buffers against rising geopolitical risks. The global financial safety net also needs to be buttressed through adequate levels of international reserves held by countries, central bank liquidity swap arrangements, and precautionary credit lines from international financial institutions.

Publications

Latest Issue

Finance & Development

An IMF for Tomorrow

September 2023

Annual Report

Committed to Collaboration

Regional Economic Outlook Reports, All Regions

Regional Economic Outlooks

Latest Issues

Browse by Year
Browse by Subject
Browse by PhD Course
Browse by Author
Browse by Co-Advisor

!-->

Essays on financial stability: old and new risk sources

Ilaria, Gianstefani (2023) Essays on financial stability: old and new risk sources. Advisor: Crimaldi, Prof. Irene . Coadvisor: Renò, Prof. Roberto . pp. 182. [IMT PhD Thesis]

ThesisGianstefaniIlariaFinal.pdf
Available under License .

European Central Bank (ECB) defines financial stability1 as ”a condition in which the financial system – which comprises financial intermediaries, markets and market infrastructures – can withstand shocks and unravel financial imbalances. This mitigates the prospect of disruptions in the financial intermediation process that are severe enough to impact real economic activity adversely.” Practically speaking, stability is a balance among the agents participating in the financial environment: market par- ticipants weave relationships, creating dependencies and interconnec- tions. The risks and vulnerabilities affecting one agent can impact many others, generating a cascade effect that propagates and might throw the system out of balance. Hence it is essential to identify all the potential sources of risk in the spirit that if we can recognize the form and assess the severity, we can cope with specific risks and prevent the system from unbalancing.

Item Type:	IMT PhD Thesis
Subjects:
PhD Course:
Identification Number:	https://doi.org/10.13118/imtlucca/e-theses/379
NBN Number:
Date Deposited:	04 Jul 2023 08:43
URI:

Actions (login required, only for staff repository)

View Item

Financial Markets
Financial Stability

Essays on Financial Stability

February 2003

Simon Fraser University

The Bank of Canada
This person is not on ResearchGate, or hasn't claimed this research yet.

Discover the world's research

25+ million members
160+ million publication pages
2.3+ billion citations

No full-text available

To read the full-text of this research, you can request a copy directly from the authors.

Natalia Trusova
Iryna A. Chkan
N. Radchenko
Natalia N. Rubtsova
Leontin Stanciu
Shuyuan Chen
Ionuţ-Andrei PRICOP
Pragita Aci Adistya
Agus Sumanto

Tatiana Odinokova
Alexander Kharitonovich
Galina Morozova
Raisa Timofeeva

Joudar Fadoua
Dinar Brahim
Katarzyna Owsiak
Viktoriia Kremen

Olha KREMEN

Kritchaya Janjaroen

Abderrahim Hansali
Dan Ciuriak
S. Serikbayeva
Hande Çalışkan Terzioğlu
Wirdatul Aini
A. Tony Prasetiantono

Yaşam DEMİR

Bogusław Pietrzak
Katarzyna Wasiak
Samuel Ronnqvist

David Williams

Kina Chenard
HARVARD BUS REV

Charles M. Kahn

E. Ontiveros

David Shirreff
J BANK FINANC
Glenn Hoggarth

Hyun Song Shin

Charles J. Jacklin
Sushil Bikhchandani

Bob Woodward
Poonam Gupta

J INT MONEY FINANC

Douglas Gale
R. Glen Donaldson
EUR ECON REV
Philippe Aghion
Patrick Bolton
Mathias Dewatripont
J Int Financ Market Inst Money

J FINANC ECON
T.H.L. Beck

Norman Loayza
Sudipto Bhattacharya

Yehning Chen
REV FINANC STUD

J MONEY CREDIT BANK
Xavier Freixas

Jean Tirole

Rodrigo O. ValdÃ©s

Ceyla Pazarbasioglu
George J. Benston

David Marshall
Alan Greenspan

Andy Haldane

Christopher N. Avery

James Powell

Stanley Fischer
Handbook Macroecon

G.G. Kaufman
Ravi Jagannathan

D B Sicilia
J L Cruickshank
Recruit researchers
Join for free
Login Email Tip: Most researchers use their institutional email address as their ResearchGate login Password Forgot password? Keep me logged in Log in or Continue with Google Welcome back! Please log in. Email · Hint Tip: Most researchers use their institutional email address as their ResearchGate login Password Forgot password? Keep me logged in Log in or Continue with Google No account? Sign up

DSpace@MIT Home
MIT Libraries
Doctoral Theses

Essays on institutions for financial stability

Other Contributors

Show Statistical Information

Why Financial Stability is Important in Life

Around India with MoneyTap 1
Consumer Durable 1
Credit Cards 32
Credit Score 27
Know MoneyTap Better 26
MoneyTap 50
MoneyTap in Daily Life 38
Personal Loan 86
Shopping on EMI 4
Wedding Loan 1

There are two types of financial stability. One relates with our personal finances. The other has a broader, wider implication and concerns businesses and countries.

In this article, let’s discuss why financial stability is important in life. I mean personal financial stability.

Let me put it this way.

Have you ever gone broke and didn’t have money to afford a meal? Or fallen short of cash when you needed it the most? I’ve seen people go through these real life scenarios. And trust me, they are a living nightmares.

An old proverb says money can’t buy you happiness. Very true. I’ll agree with this. But money can definitely keep away unhappiness. That’s the main reason why financial stability is important in life.

American author, financial advisor and TV host Susan (Suze) Orman says: “A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.”

These ‘what-ifs’ that Suze speaks of are various regrets in life that can arise due to financial instability. Therefore, to understand financial stability, let’s first understand what’s financial instability?

Defining Personal Financial Instability

In my humble yet honest opinion, financial instability is not just temporary money shortage. Financial instability means not having proper income for any reason. This translates as no savings, no investments and possibly no source to get money or other resources when absolutely necessary.

Financial instability also means dependence upon others for daily, basic needs and colossal loans and credit due to spending beyond limit. To me, financial instability also means a general unwillingness to rise out of such situation.

There could be lot many definitions, but I prefer to stick with my own.

Now, let’s see why financial stability is important in life.

Importance of Financial Stability in Life

Financial stability doesn’t automatically mean a stress-free life or one without problems. Stress and problems are integral part of our life. Hence, financial stability has several different features.

1. Financial Stability Buys Respect

Whether or not we agree, but the common tendency is to avoid people that are always asking for money or stuff or narrating their problems due to lack of money. We avoid such people. Regardless of how qualified or good natured they are, the tendency is to shun such people.

Now assume you are the person asking for money or things and complaining about hardships. Would you get any respect from people including close relatives? Definitely not. The modern society respects only people that are financially stable. Even a shady character loaded with money gets respect. Hence, financial stability buys respect.

2. Physical & Mental Wellbeing

Another reason why financial stability is important to life is for life itself. Generally, people that are financially unstable suffer from stress and emotional disorders. Over a period of time, these affect the body. A financially unstable person can suffer from aches, pains, frequent fevers and infections. That a strong link between physical and mental health exists is known since ancient times.

Financial stability therefore ensures you don’t fall victim to money related stress and mental disorders. Money affords you healthy food and if necessary, medical care . Even financially strong people experience stress, but for different reasons. And this stress doesn’t necessarily cause mental illness.

3. Financial Stability & Family

Wealthy couples get along very well. That’s what we’re led to believe all along. And that’s sheer rubbish. A survey by a leading economic daily finds, less than 30 percent of couples trust their partners on money matters. Another 26 percent of the sample population or respondents say, their partners are secretive about personal finances. This in turn leads to quarrels in marriage.

Why? Because both partners fear about financial stability. The survey finds that overspending by a partner and neglecting investments is the main reason for this distrust. Without proper savings and investments, there can be no financial stability. And that will remain cause for marital discord.

4. Employment & Job Opportunities

An employer will hire you only when you appear to be financially stable. Because they don’t want your money problems to affect their business. Financially stable people are able to focus better on work and can prove highly productive. They don’t take their money related issues to work.

While poorer people are also hardworking and efficient, their financial woes sometimes stresses them beyond limit. Their money problems also attend office. As a result, their productivity can be inconsistent. This is not a rule as such but such situations can arise.

5. Owning a Permanent Home

Owning a home has great significance in India. For most ordinary Indians, owning a home is a lifetime goal. And many achieve this objective through hard work and proper financial planning. Having own house has immense benefits : it’s an asset whose value increases over the years. And it provides shelter.

Financially unstable people have to live in rented premises, often very cheap and seedy accommodations, unless they have parental or ancestral home. They are dependent upon others for the basic human need- shelter. And they can lose shelter anytime if the house owner evicts them for any reason.

6. Old Age & Retirement

Yet another reason why financial stability is important in life is for old age and retirement. A financially stable person or couple is able to invest in schemes & plans for amass wealth of those golden years when regular income ceases. Hence, they can lead happier life as retirees.

In stark contrast, a financially unstable person would usually be dependent upon some kindly relative to provide food, shelter and clothing and often, medicines during old age. Unless some charity decides to onboard them, financially unstable people face the very gloomy prospect of destitution during old age.

In Conclusion

So at the end it implies that everyone gets opportunities to become financially stable. Yet, these people fail because they can’t manage finances, save or invest astutely.

Shiv Nanda is a financial analyst at MoneyTap who loves to write on various financial topics online. He also advises people on financial planning, investment choices and budgeting skills, and helps them make their financial lives better.

Posts you may like

Experience MoneyTap Power

Subscribe Now

Find our social channels

Download the app

Cadmus Home
Department of Economics (ECO)

Essays on financial stability

Retrieved from Cadmus, EUI Research Repository

Show full item record

Files associated with this item

Collections

Home > DISSERTATIONS > AAI13420048

Essays on Monetary Policy and Financial Stability

Nimrod Segev , Fordham University

This dissertation consists of three independent chapters that study the relationship between monetary policy and financial stability. In the first chapter, I present new empirical evidence for the existence and the aggregate economic implications of the "risk-taking channel" of monetary transmission. I first use loan-level data from the syndicated loan market in the U.S. to show that monetary policy affects banks' sensitivity to risk. I then provide evidence for the significant contribution of risk-taking shocks and changes in banks' risk-taking behavior to economic outcomes and business cycle fluctuations. The second chapter examines how competition in the banking sector affects the transmission of monetary policy and the variation of credit expansion across regions in the United States. Using the U.S. branching deregulation between 1994 to 2008 as an exogenous change in banks' competition, I analyze how banks' market power affects monetary policy transmission through the bank lending channel. The results document a significant and negative relationship between banks' market power and the effect of monetary policy on banks loan supply. I then show that states with a more deregulated banking sector were more affected by monetary conditions in the years leading to the Great Recession. Specifically, the effect of loose monetary conditions on the expansion of households' debt was stronger in states that had fewer bank branching restrictions. The results suggest that variations in the level of bank competition may have amplified regional asymmetries in years leading to the Great Recession. The third chapter studies the effect of bank competition on the optimal use of monetary and macroprudential policies. I first present empirical evidence documenting the dampening impact that banks' market power has on the transmission of monetary policy in the United States. To study the policy implications of these findings, I develop a New Keynesian DSGE model with collateral constraints and an imperfect competitive banking sector. The results from the model demonstrate that the degree of competition in the banking sector has a sizable impact on the optimal mix of monetary and macroprudential policies. Specifically, the gains from leaning-against-the-wind monetary policy are substantially smaller when the banking sector is less competitive.

Subject Area

Economics|Finance

Recommended Citation

Segev, Nimrod, "Essays on Monetary Policy and Financial Stability" (2019). ETD Collection for Fordham University . AAI13420048. https://research.library.fordham.edu/dissertations/AAI13420048

Since June 25, 2019

Advanced Search

Notify me via email or RSS
Collections
Disciplines

Author Corner

Home | About | FAQ | My Account | Accessibility Statement

Privacy Copyright

Financial Stability

The Federal Reserve monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses.

<p>The Panic - Run on the Fourth National Bank, No. 20 Nassau Street [New York City, 1873]. (Image LC-USZ6-952 via<a href="https://www.loc.gov/pictures/resource/cph.3a00900/"> Library of Congress Prints and Photographs Division</a>)<br></p>

The Panic - Run on the Fourth National Bank, No. 20 Nassau Street [New York City, 1873]. (Image LC-USZ6-952 via Library of Congress Prints and Photographs Division )

Last updated October 12, 2023

Essays in This Theme

Asian Financial Crisis - A financial crisis started in Thailand in July 1997 and spread across East Asia

Bank Holiday of 1933 - For an entire week in March 1933, all banking transactions were suspended

Banking Act of 1932 - The Banking Act of 1932 reformed the Federal Reserve’s role providing credit during economic downturns.

Banking Act of 1933 - Commonly called Glass-Steagall, the Act was widely debated before its enactment

Banking Panics of 1930-31 - The U.S. appeared to be poised for economic recovery when a series of bank panics began in fall 1930

Banking Panics of 1931-33 - Earlier regional banking panics turned into a nationwide financial crisis in fall 1931

Banking Panics of the Gilded Age - The late 19th century was beset by panics

Continental Illinois: A Bank that Was Too Big to Fail - The phrase “too big to fail” became commonly used for the first time after Continental’s crisis

Emergency Banking Act of 1933 - The 1933 law was aimed at restoring public confidence in the nation’s financial system

Emergency Lending to Nonbank Borrowers - The Emergency Relief and Construction Act of 1932 expanded the Fed's ability to make certain loans under "unusual and exigent circumstances."

Federal Reserve Credit Programs During the Meltdown - The Fed introduced various credit programs to deal with the 2007-09 financial crisis

Latin American Debt Crisis - During the 1980s, many Latin American countries were unable to service their foreign debt

Near Failure of Long-Term Capital Management - A group of banks and brokerage firms prevented the collapse of this hedge fund in 1998

The Panic of 1907 - The story of the crash that inspired monetary reform

Reconstruction Finance Corporation Act - During the years 1932 and 1933, the Reconstruction Finance Corporation effectively served as the discount lending arm of the Federal Reserve Board.

Savings and Loan Crisis - The 1980s was a period of distress for the financial sector, especially savings and loans

Stock Market Crash of 1929 - On October 28, 1929, the Dow declined nearly 13 percent

Stock Market Crash of 1987 - The Dow dropped 22.6 percent on Black Monday, October 19, 1987

Subprime Mortgage Crisis - The 2007-10 crisis stemmed in part from an expansion of mortgages to high-risk borrowers

Support for Specific Institutions - The failures of Bear Stearns and Lehman Brothers and the bailout of AIG occurred in 2008

Related Essays

Supervision and Regulation
The Fed's Functions

Federal Reserve History

Announcements

The AI adventure: how artificial intelligence may shape the economy and the financial system

Speech by Klaas Knot, Chair, Financial Stability Board, at the IMF/World Bank Constituency meeting in Moldova, 11 July 2024

The views expressed in these remarks are those of the speaker in his role as FSB Chair and do not necessarily reflect those of the FSB or its members.

Innovation is everywhere. Take the wine industry here in Moldova, for example. An industry that goes back thousands of years. When I was preparing for this meeting, it was pointed out to me that recent innovations in agriculture have greatly improved wine production in your country. I was particularly amazed to hear about the use of drones to monitor the health of vineyards. And about the optimisation of grape production through automated irrigation systems and data analytics. If you want to get a literal taste of what innovation can bring, look no further than Moldova.

Since the early days of economics, we’ve known that technological innovation is an important driver of economic output per worker, and therefore of wealth and prosperity. That’s why generative artificial intelligence is so exciting: with the emergence of incredibly capable generative models and dramatic advances in computing power, we might very well be on the verge of a new technological revolution. Studies suggest that AI can greatly increase total factor productivity across several industries, including the financial sector, healthcare, manufacturing, energy, transport and logistics. Research also shows that the use of AI can significantly improve productivity within individual companies. This may contribute to economic growth in a meaningful way.

This would be great news. At the recent IMF Spring Meetings, the talk of the town was lagging productivity growth. In large parts of the world, productivity growth has been sluggish for many years now, so a boost from AI would be very welcome.

Obviously, it’s difficult to predict the impact AI will have on the economy and productivity at this juncture. We’re already amazed at what ChatGPT and other generative AI models can do. But when we look back five years from now, today might very well seem like the Stone Age. I will certainly not claim to have all the answers. But we can make some intelligent guesses about the impact of AI, based on recent developments and sound economic thinking.

For one thing, AI will likely shake up labour markets. Although the jury is still out on the net effects, we know that the current wave of generative AI presents new dynamics. It can both replace and complement human labour. So like any other new technology, AI can create and destroy jobs. What’s new about AI, however, is that it’s especially the high-skilled, high-paying jobs that are vulnerable. The ultimate impact is likely to be sector specific, and will partly depend on companies’ creativity, and their ability to adopt AI in a way that complements, rather than replaces, human labour. Policies and regulations can also help steer these developments. It’s especially important to have social safety nets in place to support workers who have lost their jobs, as well as labour market policies to help workers stay employed. Tax policies should also be carefully assessed to ensure that tax systems don’t favour indiscriminate labour replacement. IMF research shows that several countries have tax systems in place that implicitly favour automation over facilitation. So we need to make sure that our regulatory and fiscal policies do not work against our needs.

Differences in economic structures and education levels mean that AI may have different impacts across different countries. According to the IMF, almost 40 percent of global employment is exposed to AI. Advanced economies are at greater risk, but are also better positioned to reap the benefits of AI compared to emerging market and developing economies. In advanced economies, about 60 percent of jobs are exposed to AI, due to the prevalence of jobs that revolve around cognitive tasks. Of these 60 percent, about half may be negatively affected by AI, while the rest could benefit from enhanced productivity through AI integration. In emerging market economies, overall exposure is 40 percent, and in low-income countries it is 26 percent. This means that many emerging market and developing economies may experience less immediate AI-related disruption. On the other hand, they’re also less ready to take advantage of AI’s capabilities. This could have a negative impact on the digital divide and income inequalities between countries. That’s why emerging market and developing economies should give priority to the development of digital infrastructures and digital skills.

There are many open questions concerning AI. Instead of pretending to know the answers, my message would be this: artificial intelligence is neither the great villain nor the great saviour of our time. It’s a technology that we can use to our benefit, but only if we implement the right policies and regulations.

As regulators and policymakers, we should therefore maintain a healthy balance between harnessing the benefits of innovation while mitigating the risks. When it comes to innovation, the Americans have traditionally been focused on the opportunities, with a regulatory environment that’s more flexible and conducive to business innovation. Europeans tend to focus on the risks and call for regulation. But falling behind in adopting new innovations is a significant risk too, as all parts of the world should benefit from the productivity potential of AI. So I would call for a slightly more American attitude to things, and warn against stifling AI-driven innovation.

That said, welcoming and fostering innovation doesn’t relieve us of the obligation to monitor the risks that come with it. And that is my focus as chair of the FSB.

This year, we are updating an FSB paper on the financial stability implications of artificial intelligence, originally published in 2017. While it’s too early to say with certainty what our conclusions will be, the emerging consensus is that the risks identified in the earlier report are still there. The most important ones are concentration risk, third-party risks, possible increases in herding behaviour, and model risk, including challenges with regard to explainability.

Many of the potential risks of AI may seem new, but when you look beneath the surface, they are strikingly similar to traditional financial risks. Risks that we are familiar with. We already have frameworks to assess concentration risk, third party dependence and interconnectedness. This is good news. But potential new forms of interconnectedness in the financial system may emerge. For example, autonomous trading agents may interact to create new dynamics in financial markets. Some studies have found that AI-powered algorithms consistently learn to charge higher prices through collusive strategies, even if there’s no direct communication between them. Such interdependencies may be especially pronounced if the market for data and model providers is highly concentrated, which appears to be the case for generative AI models in particular. Although there are lots of applications out there, in practice they all seem to be based on only a handful of models, perhaps just three or four.

At this stage, the FSB’s work is purely analytical. We are not currently developing policy options or coordinating across standard setting bodies or international organisations. But the FSB is ready to do what is needed to monitor these risks and implement effective regulatory frameworks.

Regulating a fast-changing, almost ubiquitous technology may sound daunting, but we have many good tools at our disposal. AI is not a new discipline – various use cases have been around for quite some time now. And as I pointed out earlier, many of the risks involved are risks we’re already familiar with. They’re just wearing new disguises. Although this is no reason for complacency, we can take comfort in the fact that we’re not starting from scratch.

In short, I see the glass as half full. Innovation has brought us many good things throughout history, from the printing press to drones that can help improve wine production. The possibilities of AI may be endless, but humans are inventive. So I’m confident that we’ll be able to put AI to good use while keeping its darker sides in check.

Related Information

1 november 2017 artificial intelligence and machine learning in financial services.

Terms and Conditions
Privacy Notice
Cookie Notice

Understanding Economics: the Core Principles and Impact

This essay is about understanding the core principles and impact of economics. It explains how economics studies human behavior and decision-making in the context of managing limited resources. The essay covers key concepts such as scarcity, trade-offs, supply and demand, and incentives. It distinguishes between microeconomics, which focuses on individual and firm behaviors, and macroeconomics, which looks at broader economic phenomena. The essay also highlights the importance of economic theories and models in guiding policies for economic stability and growth. Additionally, it discusses the relevance of economics in addressing global issues like poverty, inequality, and sustainability, emphasizing the role of informed decision-making in improving societal well-being.

How it works

Economics is often perceived as a dry and complex subject, brimming with charts, graphs, and an array of technical jargon. However, at its heart, economics is a fascinating study of human behavior and decision-making. It delves into how individuals, businesses, and governments allocate resources, make choices, and respond to incentives. The implications of these choices can ripple through societies, affecting everything from the prices of goods and services to the availability of jobs and the stability of economies.

At its most fundamental level, economics examines how people manage scarcity.

Resources are limited, and individuals must decide how to best use what they have to meet their needs and wants. This decision-making process involves trade-offs; choosing one option often means forgoing another. For example, a family might need to decide whether to spend their disposable income on a vacation or save it for future expenses. Each choice comes with its own set of benefits and costs, which economists refer to as opportunity costs.

The study of economics can be broadly divided into two main branches: microeconomics and macroeconomics. Microeconomics focuses on the behaviors of individuals and firms, analyzing how they make decisions and interact in specific markets. It looks at issues such as consumer behavior, pricing strategies, and competition among businesses. On the other hand, macroeconomics examines the economy as a whole. It explores broader phenomena such as inflation, unemployment, and economic growth. Macroeconomics seeks to understand how policies and external factors influence an entire economy’s performance and stability.

One of the key concepts in economics is the idea of supply and demand. These forces drive the market, determining the prices of goods and services. When demand for a product increases, prices tend to rise, encouraging producers to supply more. Conversely, when demand falls, prices usually drop, and production slows. This interplay creates a dynamic and ever-changing marketplace. Understanding these patterns can help predict economic trends and guide decisions in business and policy.

Another crucial element in economics is the role of incentives. Incentives are factors that motivate individuals and organizations to act in certain ways. They can be financial, such as profits and wages, or non-financial, like social recognition and personal satisfaction. Economists study how these incentives influence behavior and outcomes. For instance, tax incentives can encourage businesses to invest in certain areas, while penalties can deter undesirable activities.

Economic theories and models provide frameworks for understanding complex realities. While they may not always capture every nuance, they offer valuable insights into how economies function and how different variables interact. These models are essential tools for policymakers, who rely on them to design and implement measures that can promote economic stability and growth. For example, during a recession, governments might use expansionary fiscal policies, such as increasing public spending or cutting taxes, to stimulate demand and create jobs.

In today’s interconnected world, the study of economics is more relevant than ever. Globalization has woven economies together, making them highly interdependent. Events in one part of the world can have far-reaching effects elsewhere. A financial crisis in one country can trigger a chain reaction, impacting international trade, investment, and employment. Understanding these global linkages is crucial for navigating the challenges and opportunities of the modern economy.

Economics also plays a vital role in addressing some of the most pressing issues of our time, such as poverty, inequality, and environmental sustainability. By analyzing the root causes and potential solutions, economists can help craft policies that promote inclusive growth and sustainable development. For example, addressing income inequality might involve measures like progressive taxation, education, and healthcare investments, and policies that ensure fair wages and opportunities for all.

Ultimately, the study of economics is about more than just numbers and theories; it’s about understanding the world we live in and making informed decisions that can improve our lives. Whether it’s a government planning its budget, a business strategizing for growth, or an individual managing their finances, the principles of economics are at play. By grasping these concepts, we can better navigate the complexities of our choices and contribute to a more prosperous and equitable society.

Cite this page

Understanding Economics: The Core Principles and Impact. (2024, Jul 21). Retrieved from https://papersowl.com/examples/understanding-economics-the-core-principles-and-impact/

"Understanding Economics: The Core Principles and Impact." PapersOwl.com , 21 Jul 2024, https://papersowl.com/examples/understanding-economics-the-core-principles-and-impact/

PapersOwl.com. (2024). Understanding Economics: The Core Principles and Impact . [Online]. Available at: https://papersowl.com/examples/understanding-economics-the-core-principles-and-impact/ [Accessed: 21 Jul. 2024]

"Understanding Economics: The Core Principles and Impact." PapersOwl.com, Jul 21, 2024. Accessed July 21, 2024. https://papersowl.com/examples/understanding-economics-the-core-principles-and-impact/

"Understanding Economics: The Core Principles and Impact," PapersOwl.com , 21-Jul-2024. [Online]. Available: https://papersowl.com/examples/understanding-economics-the-core-principles-and-impact/. [Accessed: 21-Jul-2024]

Don't let plagiarism ruin your grade

Hire a writer to get a unique paper crafted to your needs.

Our writers will help you fix any mistakes and get an A+!

Please check your inbox.

You can order an original essay written according to your instructions.

Trusted by over 1 million students worldwide

1. Tell Us Your Requirements

2. Pick your perfect writer

3. Get Your Paper and Pay

Hi! I'm Amy, your personal assistant!

Don't know where to start? Give me your paper requirements and I connect you to an academic expert.

short deadlines

100% Plagiarism-Free

Certified writers

Try AI-powered search

Stocks are on an astonishing run. Yet threats lurk

We assess what could bring the bull market to an end

The stockmarket bull getting attacked by arrows going downwards signifying the attacks will lower its returns.

A ll around the world, stockmarkets have been rising at a breakneck pace. Whether you are in America, Europe, Japan or India, prices listed on a bourse near you have spent most of this year setting fresh records, only to break them again straight away (see chart 1). America’s S & P 500 index has jumped by over 70% since a trough in 2022, and risen during 28 of the past 37 weeks, its best streak in more than three decades. True, Chinese investors are in a funk, with stocks yet to recover from a plunge that began last year. But they cut lonely figures: exclude China from MSCI ’s index of emerging-market shares, and the remainder have been clocking rapid gains, too.

Explore more

This article appeared in the Finance & economics section of the print edition under the headline “Matadors gather”

Finance & economics July 20th 2024

Why investors have fallen in love with small american firms, at last, wall street has something to cheer, japan’s strength produces a weak yen.

China’s leaders face miserable economic-growth figures

YIMBY cities show how to build homes and contain rents

Americans are wrong to wish for an era of stable bipartisanship.

From the July 20th 2024 edition

Discover stories from this section and more in the list of contents

More from Finance and economics

The rich world revolts against sky-high immigration

Moderates want to limit numbers. Radicals want mass deportations. What will be the economic consequence?

Currency meddling will prove futile

Consumer banks, on the other hand, are starting to suffer

Even though political instability is an economic threat

The Russell 2000 puts in a historic performance

But to take full advantage of deregulation, Austin and Auckland need other changes

Read The Diplomat , Know The Asia-Pacific

Central Asia
Southeast Asia
Environment
Asia Defense
China Power
Crossroads Asia
Flashpoints

Pacific Money

Tokyo Report
Trans-Pacific View

Photo Essays

Write for Us
Subscriptions

Sri Lanka’s Many IMF Programs: What’s Changed and What Hasn’t

Recent features.

Will the CSTO, Russia’s Answer to NATO, Expand?

The 2 Koreas’ Cold War Measures Destabilize the Korean Peninsula

As Protests Erupt, a Rocky Start to Sheikh Hasina’s Fourth Consecutive Term

The Ulu Tiram Attack: Inspiration for Terror in Malaysia

Has Bangladesh Lost Its Footing in the China-India Balancing Act?

How Is China’s Global Education Strategy Evolving?

With or Without Opening? Previewing China’s Third Plenum Reforms

Pakistan’s New Military Operation Alarms Pashtuns

Bangladeshi University Students Protest Quota System Reforms

What’s in Hong Kong’s Proposed Critical Infrastructure Bill?

Why the Panchen Lama Matters

The Problem With POGOs

Pacific money | economy | south asia.

Comparing the similarities and differences in Sri Lanka’s five latest agreements with the IMF highlights the country’s economic trajectory since 2001.

Sri Lanka’s Many IMF Programs: What’s Changed and What Hasn’t

Over the past two decades, Sri Lanka’s economic trajectory has been significantly shaped by assistance from the International Monetary Fund (IMF). Through a series of programs, the IMF has sought to stabilize the country’s economy, enforce fiscal discipline, and promote sustainable growth. To date, Sri Lanka has engaged in 17 IMF programs . The most recent of these initiatives is the Extended Fund Facility approved in 2023 .

A critical evaluation of the policy objectives within these programs reveals recurring themes as well as unique aspects specific to each intervention.

Key Factors Behind the 5 Most Recent IMF Programs

This analysis spans the five most recent IMF programs: the Standby Arrangement (SBA) in 2001, the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) in 2003, another SBA in 2009, the EFF in 2016, and the most recent EFF in 2023. Each program was launched in response to specific economic challenges faced by Sri Lanka, ranging from fiscal deficits and currency devaluation to post-war reconstruction and the impacts of global financial crises.

In 2001, despite achieving a 6 percent GDP growth rate in 2000, Sri Lanka’s economy encountered significant fiscal challenges. The rapid escalation in government spending and borrowing by public enterprises resulted in a fiscal deficit of approximately 10 percent of GDP. This situation was exacerbated by the depletion of foreign reserves, depreciation of the exchange rate, and rising short-term interest rates, underscoring the necessity for IMF intervention. The Standby Arrangement introduced in 2001 aimed to restore macroeconomic stability, enhance public sector finances, and rebuild reserves through the implementation of a flexible exchange rate system.

By 2003, Sri Lanka had reached a pivotal moment with the initiation of a peace process. The government introduced “ Regaining Sri Lanka ,” a comprehensive economic reform and poverty reduction strategy aimed at accelerating growth and alleviating poverty through private sector-led development. This approach marked a departure from previous policies focused on redistribution and transfers. The Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs established in 2003 were designed to support these reforms, stabilize the economy, and restore fiscal sustainability.

The global financial crisis of 2008 had a severe impact on Sri Lanka. Lax fiscal policies, dependence on short-term external financing, and an overvalued exchange rate rendered the country particularly vulnerable. The sudden cessation of capital flows and a sharp decline in foreign reserves necessitated IMF intervention. The 2009 Standby Arrangement (SBA) was implemented to facilitate adjustment to the external shock, restore fiscal health, and stabilize the financial system while preventing a disruptive devaluation.

The Extended Fund Facility in 2016 was introduced during a period of political transition, presenting an opportunity to reset macroeconomic policies. Despite underlying economic momentum, Sri Lanka faced challenges due to unbalanced policies and a difficult external environment. The Extended Fund Facility of 2016 aimed to implement structural reforms to enhance growth, reduce public debt, and strengthen financial stability, thereby laying the groundwork for sustained economic development.

The most recent Extended Fund Facility in 2023 was implemented in response to an unprecedented economic crisis, compounded by substantial fiscal imbalances, loss of access to international capital markets, and the repercussions of COVID-19. The program aimed to restore macroeconomic stability and debt sustainability, alleviate the impact on vulnerable populations, and bolster financial sector stability. Additionally, it focused on governance reforms to reduce corruption vulnerabilities and enhance growth potential.

Analysis of Policy Objectives

The table below presents the aims and objectives of recent IMF programs in Sri Lanka. The objectives of each program have been coded using the program name. The objectives of these programs reflect both recurring themes and context-specific priorities.

A critical examination of the policy objectives of these IMF programs reveals 11 themes with which the recent IMF programs align. The figure below visualizes these 11 themes and how they appear in each IMF program.

The figure above illustrates that all five recent IMF programs aimed to achieve revenue-based fiscal consolidation, highlighting Sri Lanka’s ongoing struggle with fiscal deficits and its failure to maintain progress across successive programs. Additionally, these IMF programs share other significant policy objectives, including restructuring state-owned enterprises (SOEs), strengthening foreign exchange reserves, and enhancing financial system stability.

Among the five recent IMF programs, four – all but the SBA in 2009 – have focused on SOE restructuring. This issue remains a policy priority in the latest IMF program, emphasizing Sri Lanka’s persistent challenges in reforming SOEs, particularly the Ceylon Electricity Board and the Ceylon Petroleum Corporation.

Strengthening foreign reserves has been a common target in most programs, reflecting the typical motivation for seeking IMF assistance during periods of foreign reserve shortages.

However, certain policy objectives were specific to one or two programs, representing key differences among recent IMF program goals. Notably, post-conflict reconstruction and humanitarian aid were objectives in only two programs: the ECF/EFF program in 2003 and the SBA in 2009, both initiated after extended civil conflict. The 2003 program followed peace talks with the LTTE, while the 2009 program commenced after the war ended.

Moreover, themes such as restoring price stability and public debt sustainability, mitigating corruption risks, and empowering economically disadvantaged groups were prioritized in only two recent IMF programs, particularly within the 2023 EEF, due to the specific contextual needs at the time.

The examination of IMF programs in Sri Lanka since 2000 highlights both continuity and change in policy objectives. Recurring themes such as revenue-based fiscal consolidation, SOE restructuring, and financial stability underscore persistent economic challenges. Meanwhile, the unique objectives of each program reflect the specific socioeconomic contexts at the time. This analysis not only illuminates the evolving nature of IMF interventions in Sri Lanka but also underscores the importance of context-specific policy responses to address Sri Lanka’s dynamic economic landscape.

How Is Sri Lanka Navigating Its IMF Bailout Program?

By tharindu udayanga kamburawala.

What’s in the IMF’s New Extended Fund Facility Arrangement for Sri Lanka?

By michael iveson.

How Sri Lanka Can Overcome Its Economic Crisis

By talal rafi and sirimal abeyratne.

Sri Lanka’s State-Owned Enterprises Are a Big Part of Its Economic Problems

By talal rafi.

The Quota Reform Protest In Bangladesh Is Much More Than It Seems

By md mizanur rahman.

Misreading China’s Third Plenum

By lizzi c. lee.

By Osama Ahmad

The Fallout of Russia’s Veto and Putin’s North Korea Visit

By austin wyatt.

By Janko Šćepanović

By Mitch Shin

By Saqlain Rizve

By Zam Yusa

What is stock trading?

What to know before you start trading
How to get started trading stocks
1. Open a trading account
2. Set your budget
3. Learn the basic types of stock analysis
4. Practice with a stock market simulator

5. Plan your first trade

Stock trading: how to get started for beginners.

Paid non-client promotion: Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate investing products to write unbiased product reviews.

Stock trading involves buying and selling stocks for profits within a short time period.
Trading is a risky venture, and to do it successfully requires time and understanding the market.
Trade smarter by setting your budget, risk tolerance, and trading strategy ahead of time.

We all want to be the next person to win big with a lucky stock trade. Unfortunately, this isn't in the cards for most traders. In reality, it takes a lot of knowledge, research, discipline, and patience to become a profitable stock trader.

"Investing is not about getting rich quick. Investing is about getting rich slowly," says Randy Frederick , vice president of trading and derivatives at Charles Schwab. These are wise words to live by if you're new to the stock market and wondering if trading is right for you.

But if you're curious about the thrill of short-term buying and selling and the potential profits that can come along with it, here are the basics of stock trading and the steps that will help get you started.

Stock trading entails buying and holding stocks for a short period of time in order to turn a quick and significant profit. Traders aim to take advantage of short-term pricing fluctuations in the market.

Trading can be contrasted with investing , the approach to the stock market that aims to gradually build wealth by holding assets over a long period of time. Whereas investors buy stocks and hold them for many years, traders hold them for only an hour, a day, a week, or a few months.

There are two main types of stock trading: active and passive trading.

Active trading is a highly technical approach with the goal of capitalizing on short-term price fluctuations. Active traders are generally divided into two camps, based on the time period in which they hold their securities:

Day traders: Day trading refers to any strategy that involves buying and selling stock over a single day, such as seconds, minutes, or hours.
Swing traders: Swing trading involves buying securities and holding them for days or weeks.

Passive trading focuses more on stocks' long-term trends, rather than short-term fluctuations or market news. Position trading is a type of passive trading.

Passive traders buy based on overall market trends, and sell when they believe the security hits its peak, which can take months. They generally trade less than active traders. In this way, passive traders are more akin to long-term investors who follow a buy-and-hold strategy .

How to learn stock trading

Stock trading is a tricky business. Yes, trading individual stocks can be exciting and profitable, but it's not easy. Here are a few things to keep in mind:

Successful trading takes time and commitment. If you're just starting out in trading stocks, it's best to avoid day trading and consider longer-term strategies. "Day trading is actually the worst option for beginner investors," says Frederick. In reality, for every person who makes millions off of a lucky trade, there's thousands of others who lost money trying the same tactic.

Whether you plan to trade full-time or part-time, the bottom line is trading requires a lot of time to follow the markets and spot opportunities. And when it comes to trading within short-to-medium timeframes, timing can often be everything.

Trading has tax implications. Don't let the thrill of making a quick buck distract from your obligation to the IRS. It's important to understand how taxes on trades could affect your tax bill.

When you sell your stocks for a profit, you are subject to capital gains tax . While profits on stocks held for more than a year get a special tax rate — meaning you'll most likely pay lower taxes — profits on stocks held for less than a year are taxed at the same rate as your regular income.

Knowledge is power for trading safely. Instead of blindly pursuing "hot" stock tips from a neighbor or recommendations from Wall Street analysts, it pays to develop your own trading ideas. When you study historical stock movements and research an investment yourself, you'll be able to ride market volatility or formulate an exit strategy with confidence.

Moreover, experts agree that one of the worst things you can do is let your emotions or bias influence your investing decisions. Excessive emotional trading is one of the most common ways investors damage their returns.

How to start trading stocks

Now that you're armed with the stock-trading basics, it's time to get into the real deal. Just make sure you take your time to learn the ropes. "Dip your toe in," Frederick says. "Don't dive in."

1. Open a trading account

You will need a broker to make trades, so you'll want to find one that you like and trust. There are several brokers to choose from, each with their own specialties.

As you decide on a broker, choose one with the tools, features, and interface that best complement your trading style and know-how. Other things to consider are fee structures, on-the-go accessibility, stock analysis tools, and educational resources. In the end, beginner traders will want a firm that has a wide offering and that will be there when times get tough.

If you're not sure where to begin, see our recommendations for the best stock trading apps .

2. Set your budget

Set a trading budget for yourself and stick to it. Frederick suggests that if you're drawn toward shiny new investments or companies, allocate up to 1% or 2% of your investment budget toward those assets. You can start trading with just about any amount, but don't touch money you might need in the short-term, like for mortgage payments or emergencies.

3. Learn the basic types of stock analysis

Generally, trading relies on "technical analysis," or making decisions based on stock price and historical market data, rather than "fundamental analysis," which involves evaluating a company and determining its true worth .

The goal of technical analysis is to analyze price movements of a security in an attempt to forecast future price movements. While a technical analyst may look at statistical trends and patterns with charts, a fundamental analyst will start with a company's financial statements.

While the two styles of analysis are oftentimes considered as opposing approaches, it makes financial sense to combine the two methods to give you a broad understanding of the markets to help you better gauge where your investment is heading.

In short: Any time well spent learning the fundamentals of stock trading is time well spent.

4. Practice with a stock market simulator

As you begin improving your analytical skills, you can easily put them to practice. Give stock trading a try without putting real money on the line with virtual trading, or paper trading. Virtual trading allows you to test your trading skills in a low-stakes environment.

Reputable online programs include TD Ameritrade's paperMoney , MarketWatch's Virtual Stock Exchange , and Power E*TRADE .

Once you fund your brokerage account and you're ready to place your first trade, it's time to drum up a plan, which will help you maintain discipline and consistency as a trader.

A good trading plan typically outlines entry (buy) and exit (sell) points, informed by your skill level, risk level, and your overall goals. Keep in mind that every position you hold will most likely come with its own technical parameters — so keep in mind the time and effort you'll need to give each stock the attention it deserves.

FAQs on stock trading

A fractional share allows an investor to own a small portion, or fraction, of one whole share of a stock. Exchange-traded funds can also be bought as fractional shares. Previously, retail investors would need to have thousands of dollars to invest in an expensive stock like Amazon, for example. Now, they can own a slice of Amazon with as little as $5, so they can build a diversified portfolio no matter their investing budget.

A stockbroker is a type of broker that allows you to buy and sell stocks, bonds, and other securities. When you choose a broker, you open a brokerage account, which is a fundamental step to becoming an investor. Securities are bought and sold on stock exchanges, like the New York Stock Exchange and Nasdaq. Because these exchanges require special access or membership to trade, investors need brokers to facilitate transactions. Broker firms and individuals become members of specific exchanges by meeting certain regulatory standards set by the Financial Industry Regulatory Authority (FINRA).

A cyclical stock rises and falls in tandem with the economy. When the economy is strong, unemployment is low, and production and consumer spending are high, cyclical stocks tend to gain value. But when a weakening economy hits — causing businesses to contract and lay workers off, and people to shut their wallets — the value of these stocks goes down.

Cyclical stocks can rapidly drive gains in a portfolio when the economy expands, with supply and demand in specific sectors growing. But they can also quickly reduce the value of a portfolio when spending slows and the economy starts to shrink, further dampening demand. So timing is key to investing wisely with cyclical stocks.

A defensive stock can be relied on to provide consistent returns even during an economic or market downturn. These companies typically offer goods or services people buy even when the economy isn't doing well. There are no hard and fast rules to define a defensive stock, but there are some general guidelines you should look for:

History of success: The company is established and very large. It has a couple of decades in business, at the very least, and a total market value in the billions is a reasonable threshold.
Consistent dividends: The stock has consistently paid dividends over a long period of time — 10 years or longer.
Low volatility: The beta coefficient, which measures a stock share's movements compared to the overall stock market's, is low — ideally below 1. This indicates that the stock isn't greatly affected by market swings. The beta coefficient is a complex economist's tool, but you can often find it in analysts' reports on a company, or it may be included in its online stock listing.

Momentum investing is a different approach to the stock market than other investing strategies, focusing on the pure market instead of fundamentals that drive the market. In physics, an object in motion will stay in motion until it's acted upon by an external force. Momentum investors apply the same rule to stock prices, expecting a growth trend to continue over the course of a few months. Momentum investing works on the belief that if a stock's price is increasing, it will continue to increase in the intermediate term. Once that momentum dries up — either the price has plateaued or starts declining — it's time to sell.

Main content

Share full article

Supported by

Fund to Aid Children Harmed at Birth Hasn’t Kept Promises, Families Say

The Medical Indemnity Fund was to provide worry-free health care to children severely injured at birth. But parents say it has failed them.

A boy, his mouth agape in joy as he reclines in an adjustable bed, watches a cartoon on a tablet held by his mother.

By Grace Ashford

The birth had been long and difficult. Denise Olivio requested a cesarean section, she said, but was rebuffed until a doctor decided it was an emergency.

The baby, GianRaul, came out purple, and it took doctors 15 minutes to locate his heartbeat. Hours later, Ms. Olivio and her husband — exhausted but relieved that their son had survived — said they saw their doctor and midwife being pulled aside by a man in a suit who they believed was the hospital’s lawyer.

“We locked eyes,” Ms. Olivio recalled, “like, ‘Oh, I think we need to talk to someone in a suit, too.’”

The family sued the hospital over the brain damage that had left GianRaul unable to walk, talk or breathe on his own, and it took seven years before a $6.5 million settlement was reached. In that time, he was hospitalized repeatedly for seizures, respiratory and digestive problems, even at one point receiving hospice care. Each time, GianRaul pulled through, giving rise to his nickname: G.M.O., a partial acronym for God’s miracle on earth.

Under a quirk of New York law, the family received just half of the $6.5 million settlement — used to pay the parents’ lawyer, unpaid doctors’ bills and Medicaid, as well as to set up a trust for GianRaul’s care.

We are having trouble retrieving the article content.

Please enable JavaScript in your browser settings.

Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.

Thank you for your patience while we verify access.

Already a subscriber? Log in .

Want all of The Times? Subscribe .

Information

Author Services

Initiatives

You are accessing a machine-readable page. In order to be human-readable, please install an RSS reader.

All articles published by MDPI are made immediately available worldwide under an open access license. No special permission is required to reuse all or part of the article published by MDPI, including figures and tables. For articles published under an open access Creative Common CC BY license, any part of the article may be reused without permission provided that the original article is clearly cited. For more information, please refer to https://www.mdpi.com/openaccess .

Feature papers represent the most advanced research with significant potential for high impact in the field. A Feature Paper should be a substantial original Article that involves several techniques or approaches, provides an outlook for future research directions and describes possible research applications.

Feature papers are submitted upon individual invitation or recommendation by the scientific editors and must receive positive feedback from the reviewers.

Editor’s Choice articles are based on recommendations by the scientific editors of MDPI journals from around the world. Editors select a small number of articles recently published in the journal that they believe will be particularly interesting to readers, or important in the respective research area. The aim is to provide a snapshot of some of the most exciting work published in the various research areas of the journal.

Original Submission Date Received: .

Active Journals
Find a Journal
Proceedings Series
For Authors
For Reviewers
For Editors
For Librarians
For Publishers
For Societies
For Conference Organizers
Open Access Policy
Institutional Open Access Program
Special Issues Guidelines
Editorial Process
Research and Publication Ethics
Article Processing Charges
Testimonials
Preprints.org
SciProfiles
Encyclopedia

Article Menu

Subscribe SciFeed
Recommended Articles
Google Scholar
on Google Scholar
Table of Contents

Find support for a specific problem in the support section of our website.

Please let us know what you think of our products and services.

Visit our dedicated information section to learn more about MDPI.

JSmol Viewer

Slope stability analysis of rockfill embankments considering stress-dependent spatial variability in friction angle of granular materials.

Share and Cite

Ran, C.; Zhou, Z.; Lu, X.; Gong, B.; Jiang, Y.; Wu, Z. Slope Stability Analysis of Rockfill Embankments Considering Stress-Dependent Spatial Variability in Friction Angle of Granular Materials. Appl. Sci. 2024 , 14 , 6354. https://doi.org/10.3390/app14146354

Ran C, Zhou Z, Lu X, Gong B, Jiang Y, Wu Z. Slope Stability Analysis of Rockfill Embankments Considering Stress-Dependent Spatial Variability in Friction Angle of Granular Materials. Applied Sciences . 2024; 14(14):6354. https://doi.org/10.3390/app14146354

Ran, Congyong, Zhengjun Zhou, Xiang Lu, Binfeng Gong, Yuanyuan Jiang, and Zhenyu Wu. 2024. "Slope Stability Analysis of Rockfill Embankments Considering Stress-Dependent Spatial Variability in Friction Angle of Granular Materials" Applied Sciences 14, no. 14: 6354. https://doi.org/10.3390/app14146354

Article Metrics

Further information, mdpi initiatives, follow mdpi.

Subscribe to receive issue release notifications and newsletters from MDPI journals

IMAGES

Financial Stability Ratios (400 Words)
Essay: Financial stability
Accounting for Decision Making and Financial Stability
External Stability Essay
Importance of Global Financial Stability Essay Example
Financial Intermediation and Bank Stability Essay Example

VIDEO

What is financial stability?
Executing Financial Stability in the Philippines
1 FINANCIAL STATEMENT CHARACTERTISTICS PART 1
IELTS Essay Topic
Changes in economic resources of investor with financial statement Part 1
Argumentative Essay: PYC4805 ASSIGNMENT 2 2024

COMMENTS

Financial Stability
Financial stability is paramount for economic growth, as most transactions in the real economy are made through the financial system. The true value of financial stability is best illustrated in its absence, in periods of financial instability. During these periods, banks are reluctant to finance profitable projects, asset prices deviate ...
PDF ESSAYS IN INTERNATIONAL FINANCE
the two phenomena are not the same. The principal focus of this essay will be financial stability, that is, the stable functioning of the intermedi-aries and markets that make up the financial system. There is, as yet, no generally accepted definition of financial stability. For the purpose of this survey, I shall take it to be an absence of
PDF Bank of Canada Banque du Canada
Essays on Financial Stability by John Chant, Alexandra Lai, Mark Illing, and Fred Daniel. The views expressed in this report are solely those of the authors. No responsibility for them should be attributed to the Bank of Canada. September 2003 Essays on Financial Stability
PDF Essays on Financial Stability
Essays on Financial Stability tor until the early 1980s. The regulations in place in the period following the great depression until the period of liberalisation in the 1970s and 1980s suggest that regulators at the time held the 'competition-fragility' and 'concentration-stability' views.
Essays on Financial Stability: Lessons for Macroprudential Supervision
The first essay empirically analyses how the capital buffer held by banks behave over the business cycle after financial factors have been accounted for. Using a large panel of banks for the period 2000-2014, it documents evidence that capital buffers behave more pro-cyclical than previously found in the literature.
Global Financial Stability Report
Global Financial Stability Report, October 2021. October 6, 2021. Description: Financial stability risks have been contained so far, reflecting ongoing policy support and a rebound in the global economy earlier this year. Chapter 1 explains that financial conditions have eased further in net in advanced economies but changed little in emerging ...
Essays on Financial Stability
Abstract. This thesis consists of three chapters that analyze the stability of financial institutions. The focus lies on self-fulfilling liquidity crises that are associated with maturity transformation conducted by financial intermediaries such as banks. The first chapter shows that the government has a distinct role in ensuring the ...
Essays on Financial Stability
In his essay, Mark Illing provides four case studies of episodes often thought of as periods of financial stress or crisis—the stock market crash of October 1987, the near-collapse of Long-Term Capital Management in 1998, the failures of the Canadian Commercial Bank and the Northland Bank in 1985, and the Bank of New York's 1985 computer problem.
EconPapers: Essays on Financial Stability
The first three essays consider different aspects of the question, What is financial stability/instability? The first essay, by John Chant, Special Adviser at the Bank in 2001-02, considers how financial instability differs from other kinds of instability, how it is different from the volatility normally associated with a well-functioning ...
Essays in financial stability under financial frictions
Abstract: This thesis is a collection of essays where I explore and extend the study of the role of financial frictions for the determination of asset prices, financial stability, and economic resilience. The frictions included in the analysis are individual and aggregate uncertainty, agent heterogeneity, money, liquidity and default.
Essays on Financial Stability
The first essay, by John Chant, Special Adviser at the Bank in 2001-02, considers how financial instability differs from other kinds of instability, how it is different from the volatility normally associated with a well-functioning financial system, and how instability can be propagated within the financial system and to the real economy. In ...
PDF Essays on Financial Institutions and Financial Stability
This dissertation is composed of three essays related to financial institutions and financial stability. The first essay constructs a measure of integration among global banks and examines its impact on bank insolvencies and bank crises. This measure indicates that the banking industry has become more globally integrated over the past two decades.
Global Financial Stability Report
Financial stability risks have increased rapidly as the resilience of the global financial system has faced a number of tests. Recent turmoil in the banking sector is a powerful reminder of the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities since the global financial crisis.
Essays on financial stability: old and new risk sources
Practically speaking, stability is a balance among the agents participating in the financial environment: market par- ticipants weave relationships, creating dependencies and interconnec- tions. ... Essays on financial stability: old and new risk sources Ilaria, Gianstefani (2023) Essays on financial stability: old and new risk sources.
Essay No. 2: Education and Wealth
This second essay and video, The Role of Education in the ''Demographics of Wealth'' series from the St. Louis Fed's Center for Household Financial Stability discusses that more education usually leads to more money, but the authors of this study caution that the former doesn't guarantee the latter for a variety of reasons. May. 5, 2015.
Essays on Financial Stability
The first essay, by John Chant, Special Adviser at the Bank in 2001-02, considers how financial instability differs from other kinds of instability, how it is different from the volatility ...
Essays on institutions for financial stability
This thesis includes three essays on the interaction between financial market institutions and market liquidity, and its implications for financial stability. The first essay studies an overlapping generations model of a risky asset market in which some agents face a participation cost. Market participation, by affecting the size of the pool of ...
PDF ESSAYS ON FINANCIAL STABILITY: MARKET STRUCTURE AND EARLY ...
1.1 Market structure and financial stability The structure of the banking market has historically been an important element of the academic and policy debate on financial stability. As in other, non-financial markets, the structure of the banking market is often seen as an important requisite for an effective system. The past
Why Financial Stability is Important in Life
Even a shady character loaded with money gets respect. Hence, financial stability buys respect. 2. Physical & Mental Wellbeing. Another reason why financial stability is important to life is for life itself. Generally, people that are financially unstable suffer from stress and emotional disorders.
Essays on financial stability
Essays on financial stability. This thesis consists of two essays concerning how banking regulations may promote financial stability. The first chapter investigates the competition-concentration-stability nexus from a novel perspective, by considering how concentration and, inter alia competition, affect the likelihood of an individual bank ...
Essays on Monetary Policy and Financial Stability
This dissertation consists of three independent chapters that study the relationship between monetary policy and financial stability. In the first chapter, I present new empirical evidence for the existence and the aggregate economic implications of the "risk-taking channel" of monetary transmission. I first use loan-level data from the syndicated loan market in the U.S. to show that monetary ...
Financial Stability
Financial Stability. The Federal Reserve monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses. The Panic - Run on the Fourth National Bank, No. 20 Nassau Street [New York City, 1873]. (Image LC-USZ6-952 via Library of Congress Prints ...
Financial Stability
Key Takeaways. Financial stability defines the financial system of a country based on the availability of resources, utilities, loans, and employment opportunities. Economic stability is measured using GDP, inflation, fiscal deficit, trade deficit, interest rates, employment levels, income inequality, and cash flows.
The AI adventure: how artificial intelligence may shape the economy and
This year, we are updating an FSB paper on the financial stability implications of artificial intelligence, originally published in 2017. While it's too early to say with certainty what our conclusions will be, the emerging consensus is that the risks identified in the earlier report are still there. The most important ones are concentration ...
Understanding Economics: The Core Principles and Impact
The essay also highlights the importance of economic theories and models in guiding policies for economic stability and growth. Additionally, it discusses the relevance of economics in addressing global issues like poverty, inequality, and sustainability, emphasizing the role of informed decision-making in improving societal well-being.
Stocks are on an astonishing run. Yet threats lurk
Essay; Schools brief; Business & economics. Finance & economics; Business; Big Mac index; ... Mr Kaiser notes, could be the catalyst for a bond-market crash. By threatening financial stability ...
Sri Lanka's Many IMF Programs: What's Changed and What Hasn't
The Extended Fund Facility of 2016 aimed to implement structural reforms to enhance growth, reduce public debt, and strengthen financial stability, thereby laying the groundwork for sustained ...
Stock Trading: What You Need to Know to Get Started
Stock trading is the buying and selling of securities in order to make a profit. But there's a lot to know before getting started and comes with risk.
Fund to Aid Children Harmed at Birth Hasn't Kept Promises, Families Say
Reimbursement checks were slow to arrive, placing the family in a financial bind. These were common complaints among the fund's families, Ms. Olivio would learn — so frequent that one mother ...
Applied Sciences
Slope stability is a major safety concern of rockfill embankments. Since rockfills are incohesive materials, only friction angle is considered as a shear strength parameter in the slope stability analysis of rockfill embankments. Recently, it was found that confining pressure can significantly affect the mean value and variance of the friction angle of rockfills.

Financial stability

Feedback Survey

Essays on Financial Stability: Lessons for Macroprudential Supervision and Regulation

--> Thesis -->

Essays on Financial Stability

Art der Hochschulschrift

Klassifikation (DDC)

Stöbern

Essays on Financial Stability

Essays in financial stability under financial frictions

Email this record

Cite this record

Why is the content I wish to access not available via ORA?

Alternative access to the full-text

Contributors

Report an update

Browse Econ Literature

More features

RePEc Biblio

Essays on Financial Stability

Corrections

Suggested Citation

RePEc Genealogy

New papers by email

EconAcademics

About RePEc

Participating archives

Privacy statement

Get papers listed

Open a RePEc archive

Get RePEc data

Flagship Publications

IMF reports and publications by country

For Journalists

Press Center

Safeguarding Financial Stability amid High Inflation and Geopolitical Risks

Chapter 1: A Financial System Tested by Higher Inflation and Interest Rates

Chapter 2: Nonbank Financial Intermediaries: Vulnerabilities amid Tighter Financial Conditions

Chapter 3: Geopolitics and Financial Fragmentation: Implications for Macro-Financial Stability

Publications

Essays on financial stability: old and new risk sources

Actions (login required, only for staff repository)

Essays on Financial Stability

No full-text available

Essays on institutions for financial stability

Other Contributors

Why Financial Stability is Important in Life

Defining Personal Financial Instability

Importance of Financial Stability in Life

In Conclusion

More posts by Shiv Nanda

Posts you may like

Experience MoneyTap Power

Recent Posts

Subscribe Now

Find our social channels

Quick Links

Download the app

Essays on financial stability

Files associated with this item

Collections

Essays on Monetary Policy and Financial Stability

Subject Area

Recommended Citation

Author Corner

Financial Stability

Essays in This Theme

Related Essays

Related Links

Federal Reserve History

The AI adventure: how artificial intelligence may shape the economy and the financial system

Related Information

Understanding Economics: the Core Principles and Impact

Cite this page

Don't let plagiarism ruin your grade

We assess what could bring the bull market to an end

Explore more

Finance & economics July 20th 2024

YIMBY cities show how to build homes and contain rents

From the July 20th 2024 edition