Economics, Econometrics and Finance
4 years ago

Broker-dealer balance sheets predict economic growth, impacting monetary policy decisions.

American Economic Review
Money, Liquidity, and Monetary Policy
Tobias Adrian, Hyun Song Shin

Paper Summary

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The article discusses how changes in the balance sheets of financial institutions can impact the availability of credit and influence economic growth. Specifically, when broker-dealers reduce their balance sheets, it tends to signal a coming economic downturn. This information is crucial for policymakers to make decisions about monetary policy.