## Defining Financial Stability

_IMF Working Papers, October 1, 2004_

## Source details

**Canonical URL:** [Defining Financial Stability](https://www.imf.org/en/publications/wp/issues/2016/12/31/defining-financial-stability-17740)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/defining-financial-stability-17740/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/defining-financial-stability-17740/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/defining-financial-stability-17740/bundle-manifest.json)

## Bibliographic details
- Authors: Garry J. Schinasi
- Published: October 1, 2004
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451859546.001

---

### Summary and core definition
- Main objective: propose a definition of financial stability that has practical and operational relevance.
- Financial stability is defined in terms of its ability to:
  - facilitate and enhance economic processes,
  - manage risks, and
  - absorb shocks.
- Financial stability is considered a continuum: changeable over time and consistent with multiple combinations of the constituent elements of finance.

### Key findings and conceptual implications
- Financial stability should be evaluated by how well the financial system:
  - supports economic processes,
  - controls and allocates risk, and
  - absorbs adverse shocks without impairing core functions.
- Viewing financial stability as a continuum implies:
  - it is not a binary state (stable/unstable), and
  - multiple combinations of constituent elements of finance can produce different positions on the stability continuum.

### Practical implications for policy analysis and analytical frameworks
- The paper discusses several practical implications of the proposed definition that should be considered when:
  - using the definition for policy analysis, or
  - developing an analytical framework.
- Implications include incorporating the continuum perspective and focusing on the financial system’s functional capacities (facilitation of economic processes, risk management, shock absorption) when designing metrics and policy tools.

---

## Content in this bundle

- **_wp04187 — References**
  - [_wp04187 — References (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04187.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp04187 — References (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04187.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/defining-financial-stability-17740_