The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy
This paper proposes a measure of the extent to which a financial sector is connected to the real economy. The Measure of Connectedness is a measure of the composition of assets, namely the share of credit to the non-financial sectors over the total...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2013/10/18412872/connection-between-wall-street-main-street-measurement-implications-monetary-policy http://hdl.handle.net/10986/16881 |
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okr-10986-16881 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ACCOUNTING RULE AMOUNT OF CREDIT ASSET BACKED SECURITIES ASSET CLASS AVAILABILITY OF CREDIT BACKED SECURITIES BALANCE SHEET BALANCE SHEETS BANK LENDING BANK LOANS BANK RUNS BANKING REGULATION BANKING SECTOR BANKING SYSTEM BOND BOND YIELD BORROWER BROKERS BUSINESS CYCLE CAPITAL FLOWS CAPITAL REGULATION COLLATERAL COMMERCIAL BANK COMMERCIAL BANK CREDIT COMMERCIAL BANKING COMMERCIAL BANKS COMMERCIAL BANKS CREDIT COMMERCIAL LOANS COMMODITIES COMMODITY COMMODITY PRICE COMMODITY PRICES COMMON STOCK COMPLEX SECURITIES CONSUMER CREDIT CONSUMER EXPECTATIONS CONSUMER GOODS CONSUMER LOANS CONSUMPTION EXPENDITURE CORPORATE BONDS CREDIT CHAIN CREDIT MARKET CREDIT MARKETS CREDIT OUTSTANDING CREDIT SPREADS CREDIT UNIONS DEBT DEBT OBLIGATIONS DEFLATORS DEPOSIT DEPOSIT INSURANCE DEPOSITORY DEPOSITORY INSTITUTIONS DEPOSITS DEREGULATION DERIVATIVE DERIVATIVES DEVELOPMENT POLICY DIVIDEND DIVIDEND YIELD DURABLE DURABLE GOODS DURABLES EARNINGS ECONOMETRICS ECONOMIC ACTIVITY ECONOMICS ELASTICITY ENDOGENOUS VARIABLES ENFORCEABILITY ENTREPRENEUR ENTREPRENEURS EQUIPMENT EXCHANGE RATE EXPECTED RETURN EXPORTS FEDERAL RESERVE FEDERAL RESERVE BANK FINANCE COMPANIES FINANCIAL CONTAGION FINANCIAL CRISIS FINANCIAL GLOBALIZATION FINANCIAL INNOVATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL MODERNIZATION FINANCIAL PRODUCTS FINANCIAL SECTOR FINANCIAL SECTORS FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FLOW OF FUNDS FOREIGN EXCHANGE FUTURE RESEARCH GDP GDP DEFLATOR GLOBALIZATION GROSS DOMESTIC PRODUCT HOLDING HOME MORTGAGES HOUSEHOLDS HUMAN CAPITAL ID ILLIQUID ASSET ILLIQUID ASSETS INFLATION INFLATION RATE INITIAL DEBT INSURANCE INSURANCE COMPANIES INSURANCES INTEREST INCOME INTEREST RATE INTEREST RATE CHANGES INTERNATIONAL BANK INVENTORIES INVESTING INVESTMENT BANKING INVESTMENT DECISION INVESTMENT INCOME INVESTMENT OPPORTUNITIES INVESTMENT OPPORTUNITY INVESTMENT PROJECTS INVESTMENT VEHICLE LENDER LENDERS LENDING DECISION LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LOAN LOAN MARKET LOCAL GOVERNMENT M1 M2 MACROECONOMIC VARIABLES MACROECONOMICS MARKET INSTRUMENTS MATURITIES MERGERS MONETARY AUTHORITY MONETARY CONTROL MONETARY POLICY MONETARY SHOCK MONETARY SHOCKS MONETARY TRANSMISSION MONETARY TRANSMISSION MECHANISM MONEY MARKET MORTGAGE MORTGAGE POOLS MORTGAGES MUNICIPAL SECURITIES MUTUAL FUNDS NET WORTH OPEN MARKET OUTPUT PENSION PENSION FUNDS PERFORMANCE MEASURES POLITICAL ECONOMY PRIVATE PENSION REAL GDP REAL GROSS DOMESTIC PRODUCT RECESSION RESERVE RESERVE REQUIREMENT RESERVES RETURN RETURNS RISK PROFILES RISK TAKING SAVINGS SAVINGS INSTITUTIONS SECURITIES SECURITIZATION SHARE OF ASSETS SHARE OF CREDIT SPOT MARKET STOCK PRICE STRUCTURAL CHANGE SYSTEMIC RISK TECHNOLOGICAL CHANGE TRADE CREDIT TRADING TRADITIONAL FINANCIAL INSTITUTIONS TREASURIES TREASURY TREASURY SECURITIES UNEMPLOYMENT UNEMPLOYMENT RATE VALUATION VALUE ADDED VAR MODELS VOLATILITY WAGES WEALTH |
| spellingShingle |
ACCOUNTING ACCOUNTING RULE AMOUNT OF CREDIT ASSET BACKED SECURITIES ASSET CLASS AVAILABILITY OF CREDIT BACKED SECURITIES BALANCE SHEET BALANCE SHEETS BANK LENDING BANK LOANS BANK RUNS BANKING REGULATION BANKING SECTOR BANKING SYSTEM BOND BOND YIELD BORROWER BROKERS BUSINESS CYCLE CAPITAL FLOWS CAPITAL REGULATION COLLATERAL COMMERCIAL BANK COMMERCIAL BANK CREDIT COMMERCIAL BANKING COMMERCIAL BANKS COMMERCIAL BANKS CREDIT COMMERCIAL LOANS COMMODITIES COMMODITY COMMODITY PRICE COMMODITY PRICES COMMON STOCK COMPLEX SECURITIES CONSUMER CREDIT CONSUMER EXPECTATIONS CONSUMER GOODS CONSUMER LOANS CONSUMPTION EXPENDITURE CORPORATE BONDS CREDIT CHAIN CREDIT MARKET CREDIT MARKETS CREDIT OUTSTANDING CREDIT SPREADS CREDIT UNIONS DEBT DEBT OBLIGATIONS DEFLATORS DEPOSIT DEPOSIT INSURANCE DEPOSITORY DEPOSITORY INSTITUTIONS DEPOSITS DEREGULATION DERIVATIVE DERIVATIVES DEVELOPMENT POLICY DIVIDEND DIVIDEND YIELD DURABLE DURABLE GOODS DURABLES EARNINGS ECONOMETRICS ECONOMIC ACTIVITY ECONOMICS ELASTICITY ENDOGENOUS VARIABLES ENFORCEABILITY ENTREPRENEUR ENTREPRENEURS EQUIPMENT EXCHANGE RATE EXPECTED RETURN EXPORTS FEDERAL RESERVE FEDERAL RESERVE BANK FINANCE COMPANIES FINANCIAL CONTAGION FINANCIAL CRISIS FINANCIAL GLOBALIZATION FINANCIAL INNOVATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL MODERNIZATION FINANCIAL PRODUCTS FINANCIAL SECTOR FINANCIAL SECTORS FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FLOW OF FUNDS FOREIGN EXCHANGE FUTURE RESEARCH GDP GDP DEFLATOR GLOBALIZATION GROSS DOMESTIC PRODUCT HOLDING HOME MORTGAGES HOUSEHOLDS HUMAN CAPITAL ID ILLIQUID ASSET ILLIQUID ASSETS INFLATION INFLATION RATE INITIAL DEBT INSURANCE INSURANCE COMPANIES INSURANCES INTEREST INCOME INTEREST RATE INTEREST RATE CHANGES INTERNATIONAL BANK INVENTORIES INVESTING INVESTMENT BANKING INVESTMENT DECISION INVESTMENT INCOME INVESTMENT OPPORTUNITIES INVESTMENT OPPORTUNITY INVESTMENT PROJECTS INVESTMENT VEHICLE LENDER LENDERS LENDING DECISION LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LOAN LOAN MARKET LOCAL GOVERNMENT M1 M2 MACROECONOMIC VARIABLES MACROECONOMICS MARKET INSTRUMENTS MATURITIES MERGERS MONETARY AUTHORITY MONETARY CONTROL MONETARY POLICY MONETARY SHOCK MONETARY SHOCKS MONETARY TRANSMISSION MONETARY TRANSMISSION MECHANISM MONEY MARKET MORTGAGE MORTGAGE POOLS MORTGAGES MUNICIPAL SECURITIES MUTUAL FUNDS NET WORTH OPEN MARKET OUTPUT PENSION PENSION FUNDS PERFORMANCE MEASURES POLITICAL ECONOMY PRIVATE PENSION REAL GDP REAL GROSS DOMESTIC PRODUCT RECESSION RESERVE RESERVE REQUIREMENT RESERVES RETURN RETURNS RISK PROFILES RISK TAKING SAVINGS SAVINGS INSTITUTIONS SECURITIES SECURITIZATION SHARE OF ASSETS SHARE OF CREDIT SPOT MARKET STOCK PRICE STRUCTURAL CHANGE SYSTEMIC RISK TECHNOLOGICAL CHANGE TRADE CREDIT TRADING TRADITIONAL FINANCIAL INSTITUTIONS TREASURIES TREASURY TREASURY SECURITIES UNEMPLOYMENT UNEMPLOYMENT RATE VALUATION VALUE ADDED VAR MODELS VOLATILITY WAGES WEALTH Barattieri, Alessandro Eden, Maya Stevanovic, Dalibor The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy |
| geographic_facet |
UNITED STATES |
| relation |
Policy Research Working Paper;No. 6667 |
| description |
This paper proposes a measure of the
extent to which a financial sector is connected to the real
economy. The Measure of Connectedness is a measure of the
composition of assets, namely the share of credit to the
non-financial sectors over the total credit market
instruments. The aggregate Measure of Connectedness for the
United States declines by about 27 percent in the period
1952-2009. The authors suggest that this increase in
disconnectedness between the financial sector and the real
economy may have dampened the sensitivity of the real
economy to monetary shocks. They present a stylized model
that illustrates how interbank trading can reduce the
sensitivity of lending to the entrepreneur's net worth,
thereby dampening the credit channel transmission of
monetary policy. The Measure of Connectedness is interacted
with both a structural vector autoregressive model and a
factor-augmented vector autoregressive model for the United
States economy. The analysis establishes that the impulse
responses to monetary policy shocks are dampened as the
level of connection declines. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Barattieri, Alessandro Eden, Maya Stevanovic, Dalibor |
| author_facet |
Barattieri, Alessandro Eden, Maya Stevanovic, Dalibor |
| author_sort |
Barattieri, Alessandro |
| title |
The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy |
| title_short |
The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy |
| title_full |
The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy |
| title_fullStr |
The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy |
| title_full_unstemmed |
The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy |
| title_sort |
connection between wall street and main street : measurement and implications for monetary policy |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2013/10/18412872/connection-between-wall-street-main-street-measurement-implications-monetary-policy http://hdl.handle.net/10986/16881 |
| _version_ |
1764434794965368832 |
| spelling |
okr-10986-168812021-04-23T14:03:32Z The Connection between Wall Street and Main Street : Measurement and Implications for Monetary Policy Barattieri, Alessandro Eden, Maya Stevanovic, Dalibor ACCOUNTING ACCOUNTING RULE AMOUNT OF CREDIT ASSET BACKED SECURITIES ASSET CLASS AVAILABILITY OF CREDIT BACKED SECURITIES BALANCE SHEET BALANCE SHEETS BANK LENDING BANK LOANS BANK RUNS BANKING REGULATION BANKING SECTOR BANKING SYSTEM BOND BOND YIELD BORROWER BROKERS BUSINESS CYCLE CAPITAL FLOWS CAPITAL REGULATION COLLATERAL COMMERCIAL BANK COMMERCIAL BANK CREDIT COMMERCIAL BANKING COMMERCIAL BANKS COMMERCIAL BANKS CREDIT COMMERCIAL LOANS COMMODITIES COMMODITY COMMODITY PRICE COMMODITY PRICES COMMON STOCK COMPLEX SECURITIES CONSUMER CREDIT CONSUMER EXPECTATIONS CONSUMER GOODS CONSUMER LOANS CONSUMPTION EXPENDITURE CORPORATE BONDS CREDIT CHAIN CREDIT MARKET CREDIT MARKETS CREDIT OUTSTANDING CREDIT SPREADS CREDIT UNIONS DEBT DEBT OBLIGATIONS DEFLATORS DEPOSIT DEPOSIT INSURANCE DEPOSITORY DEPOSITORY INSTITUTIONS DEPOSITS DEREGULATION DERIVATIVE DERIVATIVES DEVELOPMENT POLICY DIVIDEND DIVIDEND YIELD DURABLE DURABLE GOODS DURABLES EARNINGS ECONOMETRICS ECONOMIC ACTIVITY ECONOMICS ELASTICITY ENDOGENOUS VARIABLES ENFORCEABILITY ENTREPRENEUR ENTREPRENEURS EQUIPMENT EXCHANGE RATE EXPECTED RETURN EXPORTS FEDERAL RESERVE FEDERAL RESERVE BANK FINANCE COMPANIES FINANCIAL CONTAGION FINANCIAL CRISIS FINANCIAL GLOBALIZATION FINANCIAL INNOVATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL MODERNIZATION FINANCIAL PRODUCTS FINANCIAL SECTOR FINANCIAL SECTORS FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FLOW OF FUNDS FOREIGN EXCHANGE FUTURE RESEARCH GDP GDP DEFLATOR GLOBALIZATION GROSS DOMESTIC PRODUCT HOLDING HOME MORTGAGES HOUSEHOLDS HUMAN CAPITAL ID ILLIQUID ASSET ILLIQUID ASSETS INFLATION INFLATION RATE INITIAL DEBT INSURANCE INSURANCE COMPANIES INSURANCES INTEREST INCOME INTEREST RATE INTEREST RATE CHANGES INTERNATIONAL BANK INVENTORIES INVESTING INVESTMENT BANKING INVESTMENT DECISION INVESTMENT INCOME INVESTMENT OPPORTUNITIES INVESTMENT OPPORTUNITY INVESTMENT PROJECTS INVESTMENT VEHICLE LENDER LENDERS LENDING DECISION LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LOAN LOAN MARKET LOCAL GOVERNMENT M1 M2 MACROECONOMIC VARIABLES MACROECONOMICS MARKET INSTRUMENTS MATURITIES MERGERS MONETARY AUTHORITY MONETARY CONTROL MONETARY POLICY MONETARY SHOCK MONETARY SHOCKS MONETARY TRANSMISSION MONETARY TRANSMISSION MECHANISM MONEY MARKET MORTGAGE MORTGAGE POOLS MORTGAGES MUNICIPAL SECURITIES MUTUAL FUNDS NET WORTH OPEN MARKET OUTPUT PENSION PENSION FUNDS PERFORMANCE MEASURES POLITICAL ECONOMY PRIVATE PENSION REAL GDP REAL GROSS DOMESTIC PRODUCT RECESSION RESERVE RESERVE REQUIREMENT RESERVES RETURN RETURNS RISK PROFILES RISK TAKING SAVINGS SAVINGS INSTITUTIONS SECURITIES SECURITIZATION SHARE OF ASSETS SHARE OF CREDIT SPOT MARKET STOCK PRICE STRUCTURAL CHANGE SYSTEMIC RISK TECHNOLOGICAL CHANGE TRADE CREDIT TRADING TRADITIONAL FINANCIAL INSTITUTIONS TREASURIES TREASURY TREASURY SECURITIES UNEMPLOYMENT UNEMPLOYMENT RATE VALUATION VALUE ADDED VAR MODELS VOLATILITY WAGES WEALTH This paper proposes a measure of the extent to which a financial sector is connected to the real economy. The Measure of Connectedness is a measure of the composition of assets, namely the share of credit to the non-financial sectors over the total credit market instruments. The aggregate Measure of Connectedness for the United States declines by about 27 percent in the period 1952-2009. The authors suggest that this increase in disconnectedness between the financial sector and the real economy may have dampened the sensitivity of the real economy to monetary shocks. They present a stylized model that illustrates how interbank trading can reduce the sensitivity of lending to the entrepreneur's net worth, thereby dampening the credit channel transmission of monetary policy. The Measure of Connectedness is interacted with both a structural vector autoregressive model and a factor-augmented vector autoregressive model for the United States economy. The analysis establishes that the impulse responses to monetary policy shocks are dampened as the level of connection declines. 2014-02-04T19:44:15Z 2014-02-04T19:44:15Z 2013-10 http://documents.worldbank.org/curated/en/2013/10/18412872/connection-between-wall-street-main-street-measurement-implications-monetary-policy http://hdl.handle.net/10986/16881 English en_US Policy Research Working Paper;No. 6667 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research UNITED STATES |