Investigating the relationship between the financial and real economy

Foreword

The papers in this volume were presented and discussed at the Autumn Central Bank Economists' Meeting held at the BIS in Basel on 9-10 October 2003. The purpose of this meeting was to discuss challenges that central banks have faced in the context of monitoring the performance of the financial sector and the interaction between the health of financial institutions and macroeconomic stability. These challenges can be broadly grouped into three distinct but interrelated themes.

The first deals with the influence that financial conditions have on aggregate expenditure and overall economic developments. The second theme reverses the direction and looks at the impact of the macroeconomic environment on the financial health of different economic sectors. Finally, the third theme deals with the evolving nature of the measurement of financial risk both at the micro level of individual economic units and at the macro level of whole sectors or the overall economy.