IDEAS home Printed from https://ideas.repec.org/p/bis/bisbcw/18.html

The transmission channels between the financial and real sectors: a critical survey of the literature

Author

Listed:
  • Bank for International Settlements

Abstract

Understanding the transmission channels that exist between the financial and real sectors of the economy is critically important when assessing financial stability. Robust financial systems are viewed as those that do not adversely induce the propagation and amplification of disturbances that affect the financial system and those that are capable of withstanding shocks and limiting disruptions in the allocation of savings to profitable investment opportunities. Most definitions of financial stability and the "macroprudential approach" to financial supervision recently advocated by many financial stability bodies emphasise the macroeconomic consequences of disruptions to the functioning of the financial system. This paper presents a review of the literature on the transmission channels between the financial and the real sectors, as well as observations regarding aspects of the transmission channels that remain inadequately addressed by the existing literature. The paper identifies three transmission channels that exist between the financial and the real sector: (i) the borrower balance sheet channel; (ii) the bank balance sheet channel; and (iii) the liquidity channel. The first two channels are often referred to as the financial accelerator channel; the third channel emphasises the liquidity position of banks' balance sheets, whose interest has been fairly recent - in part, spurred on by the current crisis. A report reflecting some of the findings of this literature, as well as other analysis within the Basel Committee, will be published in the future.

Suggested Citation

  • Bank for International Settlements, 2011. "The transmission channels between the financial and real sectors: a critical survey of the literature," BCBS Working Papers 18, Bank for International Settlements.
    • Handle: RePEc:bis:bisbcw:18
    as

    Download full text from publisher

    File URL: https://www.bis.org/publ/bcbs_wp18.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: https://www.bis.org/publ/bcbs_wp18.htm
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:bis:bisbcw:18. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.