To illustrate my point, let me outline briefly the kind of challenges central banks face. To begin with, financial stability is not easily measured. This is hardly surprising as, in contrast to monetary policy analysis, there is no single indicator (such as inflation) to observe. Similarly, initiatives to create some sort of an all-encompassing financial stability index have failed to convince so far.
Instead, the concept of financial stability involves various financial intermediaries, financial market segments and infrastructure, for which a whole host of different quantitative and qualitative indicators exist. As a consequence, determining the degree of financial stability remains a highly complex task. At this point, the natural suggestion from an academic outsider would be to construct a theoretical model.