Monitoring Macro-Financial Vulnerability : A Primer

Ghosh, Swati R.

World Bank, Washington, DC

关键词: economic growth;    volatility;    business cycles;    economic shocks;   

RP-ID  :  106857

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Linkages between the real and financialsectors in an economy can lead to a buildup of balance sheetmismatches of key entities—corporates, financialinstitutions, households, and the public sector. Once suchimbalances have built up, they can make the economyvulnerable to macroeconomic shocks, whether external ordomestic in origin. This paper discusses the key mismatchesthat can make entities vulnerable to shocks and how suchvulnerability can build up during the business cycle.Against this backdrop, the paper then discusses a frameworkand potential indicators that may be useful to monitor suchdevelopments. These indicators are being developed as partof the MFM macro-financial monitoring effort. The paper isorganized as follows. Section two provides a briefdiscussion of the risks associated with these differentbalance sheet mismatches. Section three discusses howpositive shocks in the real sector—such as an upturn indomestic business cycles (which in turn are often instigatedor accompanied by external developments such as capitalinflows)—can interact with the financial sector and lead toa build-up of balance sheet mismatches. Section four thendescribes how, once such vulnerability has been built up, anegative shock can lead to a downward spiral of creditcontraction and economic downturns. Finally, section fivediscusses a possible set of indicators for measuring thebuildup of vulnerability.