Defining finacial stability and establishing a framework to safeguard it
The ongoing global financial crisis has been a rude awakening that the current framework for safeguarding financial stability is neither reliable nor effective. The threats to global economic stability caused by the dysfunction of credit and money markets and the weakening of the global banking system also make clear that safeguarding the stability of the financial system is as important a policy objective as maintaining monetary stability if economic growth and stability are to be achieved and sustained. Despite the global financial industry’s importance measured in terms of value added to global production and employment, global finance is not an end in and of itself. It is, instead, a means to enhancing and facilitating the efficiency of economic processes such as resource allocation, risk allocation and pricing, wealth accumulation, and ultimately economic growth and prosperity.