A New Measure of Monetary Accommodation

and Kashyap and Siegert (International Journal of Central Banking, 2020), among many others, it is evident that monetary and financial considerations are increasingly interdependent.Therefore, monetary accommodation is seen as a reflection of growing concern with financial stability.Most notable is the case of the Federal Reserve which has pursued unprecedented monetary accommodation over the past two decades.Therefore, a quantitative measure of monetary accommodation could be useful in studying the relationship between central bank policy and financial market activity.The Misery Index was introduced in the 1970's as a crude measure of economic adversity, adding together the otherwise incommensurable inflation and unemployment rates.In a similar spirit, this note introduces a rudimentary measure of monetary accommodation.Our Central Bank Accommodation Index is the simple sum of two components.The first is the difference between the growth rates of the money supply (as represented by M2) and the gross domestic product (GDP), where a greater difference signifies looser money.The other component is the difference between inflation, as represented by the annual change in the