The rapid growth of the market-based financial system since the mid-1980s changed the nature of financial intermediation in the United States profoundly. Within the market-based financial system, "shadow banks" are particularly important institutions. Shadow banks are financial intermediaries...

The macro risk premium measures the threshold return for real activity that receives funding from savers. The balance sheet conditions of financial intermediaries provide a window on the macro risk premium. The tightness of intermediaries’ balance sheet constraints determines their “risk...

In the conduct of monetary policy, there exists a risk-return trade-off between financial conditions and financial stability, which complements monetary policy’s traditional trade-off between inflation and real activity. The trade-off exists even if monetary policy does not target financial...

We document that average stock returns can be largely explained by their covariance with shocks to the aggregate leverage of security broker-dealers. Our single-factor leverage model compares favorably with standard multi-factor models in the cross-section of size and book-to-market portfolios...

Central banks have come under increasing criticism for large balance sheet losses associated with quantitative easing (QE), and some observers have also argued that QE helped fuel the post-COVID-19 inflation boom. In this paper, we reconsider the conditions under which QE may be warranted...

This paper constructs a new index for measuring de jure central bank independence, the first entirely new index in three decades. The index draws on a comprehensive dataset from the IMF's Central Bank Legislation Database (CBLD) and Monetary Operations and Instruments Database (MOID) and...

We propose the conditional volatility of GDP spanned by financial factors as a "Volatility Financial Conditions Index" (VFCI) and show it is closely tied to the market price of risk. The VFCI exhibits superior explanatory power for stock and bond risk premia compared to other FCIs. We use a...

Contributors working at the International Monetary Fund present 14 chapters on the development of monetary policy over the past quarter century through the lens of the evolution of inflation-forecast targeting. They describe the principles and practices of inflation-forecast targeting, including...

Variants of nonbank credit intermediation differ greatly. We provide a conceptual framework to help distinguish various characteristics-structural features, economic motivations, and risk implications-associated with different forms of nonbank credit intermediation. Anchored by this framework,...

This paper marks the launch of a new IMF series, Fintech Notes. Building on years of IMF staff work, it will explore pressing topics in the digital economy and be issued periodically. The series will carry work by IMF staff and will seek to provide insight into the intersection of technology and...