Author
Definition of term “financial stability”
Roger Ferguson
(Board of
Governors of the
U.S. Federal
Reserve System)
“I’ll define financial instability as a situation characterized by these three
basic criteria: (1) some important set of financial asset prices seem to
have diverged sharply from fundamentals; and/or (2) market functioning
and credit availability, domestically and perhaps internationally, have
been significantly distorted; with the result that (3) aggregate spending
deviates (or is likely to deviate) significantly, either above or below, from
the economy’s ability to produce”
Deutsche
Bundesbank, 2003
“The term financial stability broadly describes a steady state in which the
financial system efficiently performs its key economic functions, such as
allocating resources and spreading risk as well as settling payments, and
is able to do so even in the event of shocks, stress situations and periods
of profound structural change”
Wim Duisenberg
“Monetary stability is defined as stability in the general level of prices, or
as an absence of inflation or deflation. Financial stability does not have
as easy or universally accepted a definition”
Charles Freedman,
Clyde Goodlet
“Financial
Stability: What It Is
and Why It
Matters”, C.D.
Howe Institute.
Commentary, №
256, November
2007
“So what is good working definition of macro-financial stability? In spite
of the absence of a generally accepted definition, there are some
qualitative aspects that are common to most discussions and definitions. A
stable financial system is one that is robust in the face of a reasonably
wide range of adverse circumstances; that is, one that can efficiently
provide its usual range of financial services when operating under
significant stress”
Tommaso Padoa-
Schioppa
(ECB, 2003)
“[Financial stability] a condition where the financial system is able to
withstand shocks without giving way to cumulative processes which
impairs the allocation of savings to investment opportunities and the
processing of payments in the economy”
Frederick Mishkin,
1999
“Financial instability occurs when shocks to the financial system interfere
with information flow so that the financial system can no longer do its job
of channeling funds to those with productive investment opportunities”
Central Bank of
Norway, Financial
Stability Report,
June 2007
“Financial stability implies that the financial system is robust to
disturbances in the economy and can channel capital, execute payments
and redistribute risk in a satisfactory manner”
Such situation in a science (when there are many different definitions of the key
fundamental concept of this science and there is no single, clear, unified generally
accepted definition of this concept) says about some gaps in the methodological basis.
It is similar to situation in the theoretical physics at the 19
th
– beginning of 20
th
centuries, when the nature of light was not fully understood – the corpuscular or wave.
This methodological problem gave rise to some paradoxes in physics.
Similarly, there are some unresolved paradoxes in the sphere of Monetary Policy
and more generally in Monetary Economics.
Lender-Of-Last-Resort Paradox (LOLR - paradox). One of the conventional tools
of financial regulation, which aims to ensure financial stability in the banking sector in
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