Quote: "The absence of system-wide episodes in which a crisis occurs is central to financial stability, according to the majority of financial institutes."
The study of how the financial system can maintain stability in the face of shocks such as financial crises.
Macroeconomic Theory: This encompasses the study of various macroeconomic concepts such as inflation, economic growth, unemployment, and fiscal policy. It is important to understand how these factors influence financial stability.
Financial Markets: This includes the study of various financial markets, such as money markets, capital markets, and derivatives markets. Understanding these markets is crucial for understanding how financial stability can be affected by market fluctuations.
Banking and Financial Institutions: This topic covers the study of banks and other financial institutions and their role in maintaining financial stability. It also includes the study of financial intermediation and regulatory frameworks.
Financial Regulations: This encompasses the study of various financial regulations put in place by governments and international institutions to promote financial stability. This includes topics like capital requirements, stress testing, and resolution frameworks.
Risk Management: This includes the study of various risk management techniques, such as value-at-risk, credit risk management, and operational risk management. Understanding these techniques is crucial for maintaining financial stability.
International Finance: This includes the study of international trade, currency exchange rates, and international capital flows. Understanding how these factors impact financial stability is crucial for a global economy.
Corporate Finance: This topic covers the study of corporate finance and financial management, including topics such as capital budgeting, mergers and acquisitions, and financial statement analysis.
Behavioral Economics: This is the study of economic decision-making and how psychology and other social factors can influence financial stability.
Econometrics: This includes the study of statistical methods used to analyze economic data, including time series analysis, regression analysis, and panel data analysis.
Financial Modeling: This involves the study of financial models used to predict and understand economic behavior, such as DSGE models and financial market simulations.
Systemic Financial Stability: This type of financial stability refers to the overall health and soundness of the financial system, meaning it can cope with financial shocks or crises.
Macroprudential Financial Stability: This refers to the resilience of the financial system against macroeconomic shocks.
Microprudential Financial Stability: This refers to the stability of individual financial institutions.
Market Liquidity stability: This refers to the ability of the financial market to absorb large deals or trades without significantly affecting the market's price.
Funding Liquidity stability: This refers to the ability of financial institutions to meet their short-term obligations.
Sovereign Financial stability: This refers to the soundness of a country's fiscal and monetary policies, and its ability to access international capital markets.
Foreign Exchange Financial Stability: This refers to the stability of exchange rates and the ability of a country to manage exchange rate fluctuations.
Digital Financial Stability: This refers to the stability of digital finance systems, including cryptocurrencies, digital wallets, and other digital financial platforms.
Quote: "It also involves financial systems' stress-resilience."
Quote: "It is there to hold the economy together and keep the system running smoothly while such events are happening."
Quote: "It is not created to prevent crisis or stop bad financial decisions."
Quote: "The foundation of financial stability is the creation of a system that is able to function in both good and bad times and can absorb all of the positive and negative events that happen to the economy at any given time."
Quote: "It has nothing to do with preventing individuals or businesses from failing, losing money, or succeeding."
Quote: "Financial institutions include banks, savings and loans, and other financial product and service providers."
Quote: "Financial markets and financial institutions are considered stable when they are able to provide households, communities, and businesses with the resources, services, and products they require to invest, grow, and participate in a well-functioning economy."
Quote: "A financial system that meets the needs of typical families and businesses to borrow money to buy a house or car, save for retirement, or pay for college is considered to have financial stability."
Quote: "Businesses must take out loans in order to expand, construct factories, recruit new workers, and make payroll."
Quote: "Businesses and consumers simply know that they will be able to obtain short-term loans to pay their employees or that they will be able to finance significant expenditures such as the construction of a factory."
Quote: "The ability to efficiently allot resources, assess and manage financial risks, maintain employment levels close to the natural rate of the economy, and eliminate relative price movements of real or financial assets that will affect monetary stability or employment levels."
Quote: "Financial imbalances that arise naturally or as a result of significant adverse and unforeseen events are dissipated when a financial system is in a range of stability."
Quote: "When the system is stable, it will primarily absorb shocks through self-corrective mechanisms, preventing adverse events from disrupting the real economy or other financial systems."
Quote: "Because the majority of real-world transactions take place through the financial system, financial stability is absolutely necessary for economic expansion."