4 • 2011

Risk concentrations and the length of the financial intermediation chain 

Both academics and policymakers have for a long time, and often quite intensely, debated the relative merits and optimality of bank-based vs market-based financial systems. Recent research has argued that classifying financial systems as either bank-based or market-based may not be useful from the perspective of distinguishing financial systems. In fact, the most recent financial crisis provides a perfect example of why thinking in terms of a sharp distinction between bank-based and market-based financial systems does not greatly enhance our understanding of the dynamics of financial systems.
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News shocks and boom-bust cycles 

Co-movement seems to be an inherent property of business cycle data. Aggregate co-movement refers to strongly positively correlated macroeconomic aggregates such as output, consumption, investment, hours worked and real wages. On the other hand, business cycle data also flags strong sectoral co-movement, meaning that variables such as output, employment and investment tend to rise and fall together in different sectors of the economy. It would be natural to argue that these co-movement properties reflect the central role that aggregate shocks play in driving business fluctuations. However, it has proven to be surprisingly difficult to generate both aggregate and sectoral co-movement, even in models where aggregate shocks are the sole drivers of fluctuations.
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Professor Koen Schoors is the new BOFIT research fellow 

Bank of Finland’s Institute for Economies in Transition (BOFIT) held a high-level international workshop on 16–17 May on the subject of China’s monetary and exchange rate policies. Workshop participants represented both central banks and the academic world. The topic of interest was approached from numerous perspectives, as would be expected in light of the complexities involved.
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