Financial intermediation, asset prices, and macroeconomic dynamics
AbstractFluctuations in the aggregate balance sheets of financial intermediaries provide a window on the joint determination of asset prices and macroeconomic aggregates. We document that financial intermediary balance sheets contain strong predictive power for future excess returns on a broad set of equity, corporate, and Treasury bond portfolios. We also show that the same intermediary variables that predict excess returns forecast real economic activity and various measures of inflation. Our findings point to the importance of financing frictions in macroeconomic dynamics and provide quantitative guidance for preemptive macroprudential and monetary policies.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 422.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Hyun Song Shin & Emanuel Moench & Tobias Adrian, 2010. "Financial Intermediation, Asset Prices, and Macroeconomic Dynamics," 2010 Meeting Papers 297, Society for Economic Dynamics.
- NEP-ALL-2010-01-30 (All new papers)
- NEP-BAN-2010-01-30 (Banking)
- NEP-BEC-2010-01-30 (Business Economics)
- NEP-CBA-2010-01-30 (Central Banking)
- NEP-FOR-2010-01-30 (Forecasting)
- NEP-MAC-2010-01-30 (Macroeconomics)
- NEP-REG-2010-01-30 (Regulation)
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