•  Campbell J.R. and Z. Hercowitz (2005), “The role of collateralized Household Debt in Macroeconomic Stabilization”, NBER Working Paper Series, 11330, May. •  Cecchetti S., A. Flores-Lagunes and S. Krause (2006), “Assessing the Sources of Change in the Volatility of Real Growth”, NBER Working Paper Series, 11946, January. •  Dynan K.E., D.W. Elmendorf and D.E. Sichel (2006), “Can financial innovation help to explain the reduced volatility of economic growth?”, Journal of Monetary Economics, 53, pp 123-150. •  Gerardi K., H. Rosen and P. Willen (2007), “Do Households Benefit from Deregulation and Innovation? The Case of the Mortgage Market, NBER Working Paper Series, 12967, March. 15  IMF, 2006  BIS Review 42/2007  5  •  Hirtle B. (2007): “Credit Derivatives and Bank Credit Supply”, Federal Reserve Bank of New York, Staff Reports, 276, February. •  IMF (2006), “How do financial systems affect economic cycles ?” World Economic Outlook, chap. 4, pp 105-138, September. •  Jermann U., V. Quadrini (2007), “Financial Innovation and Macroeconomic Volatility”, paper presented at the Bundesbank Spring Conference, 27-28 April. •  Noyer C. (2001), “Overview”, in Economic Policy for the Information Economy, Federal Reserve Bank of Kansas, pp 399-404. •  Noyer C. (2006a), “Financial systems for economic growth”, Speech at the 3rd Conference of the Monetary Stability Fondation, Frankfurt-am-Main, 6 July. •  Noyer C. (2006b), “Does money matter? A European perspective”, Speech at the 4th ECB Central Banking Conference, Frankfurt-am-Main, 9-10 November.
This new context has had several consequences: •  both inside and outside the euro area, the reputation of the euro as a solid currency has fostered the holding of euro-denominated banknotes, which has doubled in a few years, now representing the largest banknote circulation in the world;  •  the so-called “home bias” in asset holdings has decreased further, both inside the euro area vis-à-vis assets issued in other Member States and outside the euro area vis-à-vis assets issued in the euro area. This has increased globally the demand for euro-denominated financial assets;  •  the integration and competition in the banking and financial markets that has been fostered by the euro speeded up the development and the spreading out of financial innovation throughout the euro area, affecting money and credit developments in different ways. Let me just mention some of them. 6  2    One is the rapid pace of expansion in the activities of the so-called “other financial institutions” or OFIs. OFIs are not part of the money-creating sector and are neither insurance companies nor pension funds. In particular, they include financial vehicle corporations that purchase, pool and repackage as marketable securities loans that are “securitised” by banks, thereby reducing the growth rate of loans to the private sector. The expansion in OFIs’ activities is to a certain extent mirrored in the development of their monetary assets: which is now quite significant and amounts to around 10.5% of M3.