The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
We reconsider the role of financial intermediaries in monetary economics. We explore the hypothesis that financial intermediaries drive the business cycle by way of their role in determining the price of risk. In this framework, balance sheet quantities emerge as a key indicator of risk appetite and hence of the “risk-taking channel” of monetary policy. We document evidence that the balance sheets of financial intermediaries reflect the transmission of monetary policy through capital market conditions. Our findings suggest that the traditional focus on the money stock for the conduct of monetary policy may have more modern counterparts, and we suggest the importance of tracking balance sheet quantities for the conduct of monetary policy.
For a published version of this report, see Tobias Adrian and Hyun Song Shin, "Financial Intermediaries and Monetary Economics," in Benjamin M. Friedman and Michael Woodford, eds., Handbook of Monetary Economics 3: 601-50. Elsevier B. V. (2010)