Global crisis

Angus Armstrong, E Philip Davis, 22 April 2016

Since the Global Crisis, a number of regulatory policies have been discussed, proposed and sometimes implemented to address shortcomings in the regulatory framework. This column presents the views of the speakers at a recent conference on whether we have reached an efficient outcome. For most of the speakers, the answer was a resounding “no”.

Alex Cukierman, 19 April 2016

Following the collapse of Lehman Brothers, there was a fall in growth rates of net banking credit and total net new bond issues. This column discusses these events in detail. It also suggests that the decrease in credit was mainly due to supply shrinkage. The persistence of credit arrest beyond the two years following Lehman’s collapse is due to gradual enactment of tougher banking regulations along with growing awareness of low bailout probabilities. 

Alex Cukierman, 16 April 2016

Both the US and the Eurozone reacted to the Global Crisis by injecting liquidity and loosening monetary policy. This column argues that despite the similarities in the behaviour of bank credit, the behaviour of bank reserves has been quite different. In particular, while US bank reserves have been on an uninterrupted upward trend since Lehman’s collapse, EZ bank reserves have fluctuated markedly in both directions. At the source, this is due to differences in the liquidity injections procedures between the Eurozone and the Fed.

Claudio Borio, Enisse Kharroubi, Christian Upper, Fabrizio Zampolli, 14 April 2016

Some analysts claim that secular stagnation is responsible for the disappointing post-crisis economic performance. This column provides a different explanation that points to an unsuspected villain: the misallocation of resources (in our case, labour) during the pre-crisis financial boom and the long shadow it has cast post-crisis. The findings draw on an empirical analysis covering more than 20 advanced economies over 40 years. They add strength to the view that the economy has been struggling with the legacy of a major financial boom and bust that has left long-lasting scars on the economic tissue. They also raise broader questions about the interpretation of hysteresis effects, the need to incorporate credit developments in the measurement of potential output and the design of policy more generally, and the role and effectiveness of monetary policy in the short and long term.

Avinash Persaud, 14 April 2016

Since the breakup of Bretton Woods in the early 1970s, the housing market has been at the centre of the biggest banking crises across the world. This column considers the nexus between housing, banking, and the economy, and how these ties can be broken. It argues for two modest regulatory changes in banking and insurance. These would result in life insurers and pension funds providing mortgage finance, better insulating the economy and homeowners from the housing cycle.

Other Recent Articles:

Events