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Defining Financial Stability and a Framework for Safeguarding It

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  • Garry J. Schinasi

Abstract

Financial stability is as important a policy objective as maintaining monetary stability if economic growth and stability are to be achieved and sustained. A prerequisite for more effective official oversight is the development and implementation of a better framework for assessing the ability of the financial system to perform its key economic functions, i.e. matching needs of savers and investors, providing transactions and payments services; risk pricing, spreading, sharing, and management; and the production, processing, and monitoring of information. However, the ultimate goal is sustained economic growth, stability, and prosperity. The purpose of this paper is twofold: first, to discuss a definition of financial stability and a framework for policy analysis more closely aligned with economic processes and efficiency; and second, to examine the implications and challenges for assessing systemic risk and the safeguarding of financial-system stability.

Suggested Citation

  • Garry J. Schinasi, 2009. "Defining Financial Stability and a Framework for Safeguarding It," Working Papers Central Bank of Chile 550, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:550
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    References listed on IDEAS

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    Cited by:

    1. Svatopluk Kapounek & Jana Kralova, 2014. "Financial Instability and Money Velocity - Evidence from the Financial Crisis," MENDELU Working Papers in Business and Economics 2014-44, Mendel University in Brno, Faculty of Business and Economics.
    2. Maria Vasilescu, 2012. "Financial Stability - A Theoretical Approach," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 129-132, March.
    3. Wagner, Helmut & Matanovic, Eva, 2012. "Volatility Impact of Stock Index Futures Trading - A Revised Analysis," MPRA Paper 51204, University Library of Munich, Germany.
    4. Magdalena Ziolo & Beata Zofia Filipiak & Iwona Bąk & Katarzyna Cheba, 2019. "How to Design More Sustainable Financial Systems: The Roles of Environmental, Social, and Governance Factors in the Decision-Making Process," Sustainability, MDPI, vol. 11(20), pages 1-34, October.

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