Macrofinancial Linkages

Macrofinancial linkages refer to the connections between the broader economy (macro) and the financial system. These linkages illustrate how changes in economic conditions, like employment rates or inflation, can affect financial institutions, such as banks and investment firms. Conversely, the actions of these financial institutions, like lending practices or investment strategies, can impact economic growth and stability. Understanding these relationships helps policymakers and economists assess risks and develop strategies to maintain economic stability and prevent financial crises.