Financial instability and bank's balance sheets: A note

Journal Article

2012

Permanent link to this Item
http://hdl.handle.net/11427/28931
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Abraham_Financial_2012.pdf (215.67 KB)
Authors
Abraham, H
Journal Title

South African Journal of Business Management

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https://sajbm.org/index.php/sajbm
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Volume Title
Publisher
Publisher

University of Cape Town

Department
School of Economics
Faculty
Faculty of Commerce
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Abstract
Following the recent financial crisis, it is sometimes argued that financial institutions should be regulated to a greater extent than before in order to prevent a recurrence of global financial crises. It is argued here that since banks create liquidity ex nihilo in exchange for financial collaterals whose nominal values are subject to market fluctuations, in general, banks’ regulation can have only a limited effect on the stability of the financial system. Monetary policy of central banks (i.e., setting short term interest rate) is essential to monitor asset prices and thereby create a stable financial environment.
Description

Reference:

Abraham, H. (2012). Financial instability and bank's balance sheets: A note, 43:95-98

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