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Procyclicality and Monetary Aggregates

Author

Listed:
  • Hyun Song Shin
  • Kwanho Shin

Abstract

Financial intermediaries borrow in order to lend. When credit is increasing rapidly, the traditional deposit funding (core liabilities) is supplemented with other funding (non-core liabilities). We explore the hypothesis that monetary aggregates reflect the size of non-core and core liabilities and hence convey information on the stage of the financial cycle. In emerging economies with open capital markets, non-core liabilities of the banking system take the form of short-term foreign exchange liabilities, increasing the vulnerability to the outbreak of "twin crises" where a liquidity crisis is compounded by a currency crisis.

Suggested Citation

  • Hyun Song Shin & Kwanho Shin, 2011. "Procyclicality and Monetary Aggregates," NBER Working Papers 16836, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16836
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    References listed on IDEAS

    as
    1. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-119, Winter.
    2. Gete, Pedro, 2009. "Housing Markets and Current Account Dynamics," MPRA Paper 20957, University Library of Munich, Germany, revised 24 Feb 2010.
    3. Stephen Morris & Hyun Song Shin, 2008. "Financial Regulation in a System Context," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 229-274.
    4. Shin, Hyun Song, 2010. "Risk and Liquidity," OUP Catalogue, Oxford University Press, number 9780199546367.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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