Loose financial conditions predict output gap – NY Fed paper

Loose financial conditions are a strong predictor of an output gap for economies, researchers say in a Federal Reserve Bank of New York paper.

Monetary policy-makers should therefore pay closer attention to financial conditions, Tobias Adrian, the International Monetary Fund’s director of monetary and capital markets, and his co-authors argue. The authors investigate the relationship of economic growth to financial conditions, using a sample of 10 advanced and 10 emerging market economies from

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