IDEAS home Printed from
   My bibliography  Save this article

Financial Stability and Monetary Policy: Need for International Surveillance


  • Gary Hufbauer
  • Daniel Danxia Xie


In this article, we propose a new monetary framework that defines a broader set of assets, De Facto Money (DFM), as the benchmark for improving financial stability. DFM is defined as traditional monetary aggregates plus other liquid assets such as stocks and bonds. Empirical evidence for the USA, other Organisation for Economic Co-operation and Development countries, and a few emerging countries lends strong support for the connection between exceptionally fast growth of DFM and subsequent financial instability. We recommend several potential policy instruments to implement the new monetary framework. Due to cross-country spillovers from national financial crises, we suggest that international surveillance will be necessary to monitor DFM and thus the underlying conditions for financial stability in major countries. We argue that the International Monetary Fund is the ideal institution to carry out this task in terms of its reputation and expertise. Oxford University Press 2010, all rights reserved, Oxford University Press.

Suggested Citation

  • Gary Hufbauer & Daniel Danxia Xie, 2010. "Financial Stability and Monetary Policy: Need for International Surveillance," Journal of International Economic Law, Oxford University Press, vol. 13(3), pages 939-953, September.
  • Handle: RePEc:oup:jieclw:v:13:y:2010:i:3:p:939-953

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ioana-Iuliana TOMULEASA, 2014. "The Soundness Of The Financialsystems In Cee Countries," Network Intelligence Studies, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 4, pages 295-304, November.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jieclw:v:13:y:2010:i:3:p:939-953. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.