In other words, in pursuing the dual mandate, the central bank should recognize that a wide variety of indicators drawn from labor, product, and financial markets provide information about the overall balance of supply and demand in the economy. In addition, central banks should use information from various price indicators to tell them whether the economy is overheating or running well below productive capacity.
What is the optimal mix between banks, non-bank financial institutions and markets? The academic debate used to contrast intermediary-based financial systems with market-based ones, often looking for evidence that one or the other was superior. A more nuanced view is now usually held.8 The optimal structure of the financial system is often found to change with economic development9.