Monetary policy should consider intermediaries
The size of the balance sheets of market-based financial intermediaries are important macroeconomic state variables for monetary policy, finds a paper published by the New York Federal Reserve.
The research argues that in a market-based financial system, banking and capital market developments are undividable and funding conditions are closely tied to fluctuations in the leverage of market-based financial intermediaries. For that reason, the balance sheet growth of broker-dealers gives a sense
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