The notion that financial asset returns are predictors of future economic activity is widespread, but detailed analyses provide little support for financial markets’ ability to reveal future economic activity. Even though the evidence on various indicators used by different researchers is...

Investors and analysts frequently use financial market prices in their attempts to divine market expectations--a difficult exercise because of the myriad influences on financial market prices. This article focuses on shifts in market outlook regarding the direction of interest rate movements...

The trend toward incorporating information derived from financial markets into the bank supervision process has gained momentum over the past several years. This in part reflects an evolution in the thinking about how private market information can contribute to the process. In light of the...

Bank supervisory monitoring, both on-site and off-site, generates a wealth of information with which to judge the safety and soundness of banks and bank holding companies (BHCs). For BHCs with publicly traded securities, the monitoring efforts of investors generate additional information that...

The increasingly integrated global economy presents policymakers with both opportunities and challenges. Global economic integration is widely thought to improve the allocation of resources, promote technology transfer, and enhance living standards. But, at the same time, economic integration...

Over the past three decades, we have experienced an increased number of financial crises in many countries around the world. These crises have taken place in many different parts of the financial system, including: banking and payments systems, housing finance systems, securities markets, and...

In a speech given at the Bank of International Settlements in Basil, Switzerland, in April, President Hoenig discussed how financial supervisors and monetary policymakers can contribute to a stable financial system that fully supports sustainable economic growth. ; Several financial crises in...

An important part of monetary policy is the monetary transmission mechanism, the process by which monetary policy actions influence the economy. While the transmission mechanism involves a number of channels, including exchange rates, bank credit, and asset prices, most economists consider...

Psychologists and economists hold vastly different views about human behavior. Psychologists contend that economists' models bear little relation to actual behavior. This view is supported by a large body of psychological research that shows that emotional state can significantly affect decision...

Market frictions, which exist even in efficient markets and change over time, impede trade but also offer profit opportunities. To provide a framework for understanding market frictions, the authors classify frictions into five categories.