Arbeitspapier

Macro risk premium and intermediary balance sheet quantities

The macro risk premium measures the threshold return for real activity that receives funding from savers. We base our argument in this paper on the relationship between the macro risk premium and the growth of financial intermediaries' balance sheets. The spare capacity of their balance sheets determines the intermediaries' risk appetite, which in turn determines the real projects that receive funding and, hence, the supply of credit. Monetary policy affects risk appetite by changing the ability of intermediaries to leverage their capital. We estimate the time-varying risk appetite of financial intermediaries for the United States, Germany, the United Kingdom, and Japan, and study the joint dynamics of risk appetite using macroeconomic aggregates for the United States. We argue that risk appetite is an important indicator of monetary conditions.

Language
Englisch

Bibliographic citation
Series: Staff Report ; No. 428

Classification
Wirtschaft
Financial Markets and the Macroeconomy
Monetary Policy
Financial Economics: General
Subject
Monetary policy
financial intermediation
capital markets
Finanzintermediär
Risikoprämie
Welt

Event
Geistige Schöpfung
(who)
Adrian, Tobias
Moench, Emanuel
Shin, Hyun Song
Event
Veröffentlichung
(who)
Federal Reserve Bank of New York
(where)
New York, NY
(when)
2010

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Adrian, Tobias
  • Moench, Emanuel
  • Shin, Hyun Song
  • Federal Reserve Bank of New York

Time of origin

  • 2010

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