Financial markets
Everything the IMF wanted to know about financial regulation and wasn’t afraid to ask
Does anybody have a clear vision of the desirable financial system of the future? This column has one. It gives simple answers to 12 simple questions panellists at a recent IMF conference failed to answer.
Measuring potential output: Eye on the financial cycle
It is now generally accepted that financial factors can significantly influence output, sometimes driving it away from sustainable levels. Yet, when it comes to assessing potential output – the maximum level of economic activity that can be sustained over time – the influence of financial conditions is generally neglected. This column argues that embedding information from variables that proxy the financial cycle leads to estimates of potential output that are much more precise and, above all, much more robust in real time. These estimates could help improve policymaking.
Deposit insurance after Iceland and Cyprus
Depositors in Eurozone banks are facing a steep learning curve on just exactly what deposit insurance means. This column points out that the precedents set in Cyprus and Iceland show that deposit insurance is only a legal commitment for small bank failures. In systemic crises, these are more political than legal commitments, so the solvency of the insuring government matters. A Eurozone-wide deposit-insurance scheme would change this.
This reposted column corrects an error, due to the editor, that was in the first posting.
Democratic legitimacy of the Eurozone
David Cameron’s promise of a referendum on British participation in the EU has re-ignited the debate about the EU’s democratic legitimacy, just as the struggle to overcome the crisis continues. This column argues that in order to both successfully resolve the crisis and maintain states’ ability to sustain liberal finance, a substantial shift in policy is required. Enhancing the democratic legitimacy of crisis resolution measures and wider financial reforms is essential. Without diffuse support for reforms, crisis resolution is likely to collapse under centrifugal populist pressures.
Panic-driven austerity in the Eurozone and its implications
Eurozone policy seems driven by market sentiment. This column argues that fear and panic led to excessive, and possibly self-defeating, austerity in the south while failing to induce offsetting stimulus in the north. The resulting deflation bias produced the double-dip recession and perhaps more dire consequences. As it becomes obvious that austerity produces unnecessary suffering, millions may seek liberation from ‘euro shackles’.
Other Recent Articles:
- Putting time and space back into finance
- Why financial markets are inefficient
- Have we solved 'too big to fail'?
- Bank capital requirements: Are they costly?
- Financialisation in oil markets: Lessons for policy
- A blueprint for macroprudential policy in the banking union
- The Term Auction Facility effect on liquidity risk exposure
- Banking reform: Do we know what has to be done?
- Macroeconomic adjustment and the history of crises in open economies
- Slow but steady? External adjustment within the Eurozone starts working
- Forex intervention, bond spillovers, and currency wars: Evidence from Japan 2003-04
- Why supervisors should continue measuring financial risks – the fallacy of simple rules
- The Eurozone breakup debate: Uncertainty still reigns
- Downside risk and the value anomaly
- Bank resolution: from Cinderella to centre stage
- Macroprudential policy: Economic rationale and optimal tools
- The European ban on naked sovereign credit default swaps: A fake good idea
- Notes on a scandal: Libor
- Financial crises in emerging markets: The impact of private sector risk
- The implicit subsidy of banks
Most Read
- The case for 4% inflationBall
- Helicopter money as a policy optionReichlin, Turner, Woodford
- The banking crisis as a giant carry trade gone wrongAcharya, Steffen
- Everything the IMF wanted to know about financial regulation and wasn’t afraid to askBair
- Rethinking macroeconomic policy: Getting granularBlanchard, Dell'Ariccia, Mauro
- A tale of two depressions: What do the new data tell us? February 2010 updateEichengreen, O’Rourke
- Educated in America: College graduates and high school dropoutsHeckman, LaFontaine
- Eurozone breakup would trigger the mother of all financial crisesEichengreen
- Panic-driven austerity in the Eurozone and its implicationsDe Grauwe, Ji
- Debt, deleveraging, and the liquidity trap: A new modelKrugman
Vox Talks
Vox eBooks
Don't Miss
The wisdom of Karlsruhe: The OMT court case should be dismissed
Giavazzi, Portes, Weder di Mauro, Wyplosz
CEPR Policy Research
- The "Greatest" Carry Trade Ever? Understanding Eurozone Bank RisksAcharya, Steffen
- Political Credit Cycles: The Case of the Euro ZoneFernández-Villaverde, Garicano, Santos
- Winning by Losing: Incentive Incompatibility in Multiple QualifiersDagaev, Sonin
- Income and schoolingBrückner, Gradstein
- Monetary Policy and Rational Asset Price BubblesGalí
- How the EZ crisis is permanently changing EU institutionsMicossi
- WTO 2.0: Global governance of supply-chain tradeBaldwin
- Is US economic growth over? Faltering innovation confronts the six headwindsGordon
- The economic crisis: How to stimulate economies without increasing public debtWood
- Austerity: Too Much of a Good Thing?Corsetti
Events
- Understanding banks in emerging markets5 - 6 September 2013 / EBRD, London / European Bank for Reconstruction and Development (EBRD) and Tilburg University
