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What you don’t know can hurt you: keeping track of risks in the financial system

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  • Leonard I. Nakamura

Abstract

The financial crisis of 2007-2008 left in its wake new responsibilities for regulators to monitor the economy for risks to financial stability. The new task of monitoring financial stability includes tracking the risks of financial instruments and learning where these risks are located within the financial marketplace. One way to do this is to track the quantities of financial instruments and which institutions hold them. In this article, Leonard Nakamura discusses some limitations of the current data and the current data framework and the extent to which we can use the Flow of Funds for understanding and monitoring the risk of the broad range of financial instruments, focusing on residential mortgages as an example.

Suggested Citation

  • Leonard I. Nakamura, 2013. "What you don’t know can hurt you: keeping track of risks in the financial system," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 21-29.
    • Handle: RePEc:fip:fedpbr:y:2013:i:q1:p:21-29
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    References listed on IDEAS

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    1. Keys, Benjamin J. & Mukherjee, Tanmoy & Seru, Amit & Vig, Vikrant, 2009. "Financial regulation and securitization: Evidence from subprime loans," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 700-720, July.
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    5. Kenneth R. French & Martin N. Baily & John Y. Campbell & John H. Cochrane & Douglas W. Diamond & Darrell Duffie & Anil K Kashyap & Frederic S. Mishkin & Raghuram G. Rajan & David S. Scharfstein & Robe, 2010. "The Squam Lake Report: Fixing the Financial System," Economics Books, Princeton University Press, edition 1, number 9261.
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