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Measuring Wealth and Financial Intermediation and Their Links to the Real Economy$
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Charles R. Hulten and Marshall B. Reinsdorf

Print publication date: 2015

Print ISBN-13: 9780226204260

Published to Chicago Scholarship Online: September 2015

DOI: 10.7208/chicago/9780226204437.001.0001

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Financial Statistics for the United States and the Crisis

Financial Statistics for the United States and the Crisis

What Did They Get Right, What Did They Miss, and How Could They Change?

Chapter:
(p.39) 2 Financial Statistics for the United States and the Crisis
Source:
Measuring Wealth and Financial Intermediation and Their Links to the Real Economy
Author(s):

Matthew J. Eichner

Donald L. Kohn

Michael G. Palumbo

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226204437.003.0002

Although the instruments and transactions associated with the recent financial crisis were new, the underlying themes were not: Competitive dynamics resulted in excessive leverage and risk-taking by large, interconnected firms, heavy reliance on short-term sources of funding to finance long-term, illiquid positions, and common exposures shared by major financial institutions. Subsequently, better and earlier indications of these core vulnerabilities were advocated. In a sense, gaps in data and analysis defined the shadows in which the “shadow banking system” associated with financial risks grew. More comprehensive real-time data may be valuable, but data collection is only part of developing early warning systems. Data could be used differently, by integrating ongoing analysis of macro data with the development of highly specialized information to illuminate areas of interest, including relevant instruments and transactional forms. We explain why specifying this second stage generically and prior to processing the first-stage signals will not be fruitful: a program of data collection specified ex ante might look for vulnerabilities in the wrong place, particularly if the act of looking by macro- or microprudential supervisors causes the locus of activity to shift into a new shadow somewhere else, which we argue occurred before the recent crisis.

Keywords:   financial crisis, financial statistics, financial innovation, credit cycle, leverage cycle, shadow banking

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