Atish R. Ghosh, Jonathan D. Ostry, Mahvash S. Qureshi, 12 May 2017

There has been growing recognition that emerging markets may benefit from more proactive management of capital flows, and thus avoid crises when the flows recede. But do they do this in practice? By analysing policy responses in a sample of emerging markets, this column argues that central banks respond to capital inflows through various tools. Ironically, the most commonly prescribed instrument for coping with capital inflows – tighter fiscal policy – is the least-used tool in practice.

Thorsten Beck, Elena Carletti, Itay Goldstein, 22 November 2016

The Global Crisis has led to a new wave of regulation. This column argues that improved capital requirements, liquidity requirements, bank resolution and cross-border regulatory cooperation are welcome, but that unresolved problems remain. Specifically, regulation may become too complex, focus too little on macroprudential risks, be inadequate to deal with crises in global financial institutions, or fail to cope with financial innovation.

Philippe Karam, Ouarda Merrouche, Moez Souissi, Rima Turk, 02 February 2015

In the wake of the Crisis, policymakers have introduced liquidity regulation to promote the resilience of banks and lower the social cost of crisis management. This column shows that a funding liquidity shock, manifested as lower access to wholesale sources of funding following a credit rating downgrade, translates into a significant decline in both domestic and foreign lending. Liquidity self-insurance by banks mitigates the impact of a credit rating downgrade on lending.

Giovanni Favara, Lev Ratnovski, 06 August 2012

Macroprudential policy is meant to reduce the risks from the financial sector spilling over to the wider economy. But the debate over how to do so goes on. This column argues that macroprudential policy can be analysed through the prism of market failures that it is supposed to address.

Richard Baldwin, 30 March 2012

Risk-taking by banks played a critical role in the global crisis and Eurozone crisis. This column introduces a new eReport that focuses on four aspects of excessive risk-taking by banks, highlighting the causes and the cures. The eReport applies the best available theory and data, bringing together the main insights and views that have emerged from the crisis.

Alexander Popov, Frank Smets, 03 November 2011

Well-developed financial systems play a crucial role in stimulating growth but are associated with more frequent financial shocks and higher macroeconomic risk, as the financial crisis of 2007–09 reminded us. This column argues that the goal of financial regulation must be to reduce systemic risk without eliminating the financial sector’s contribution to long-term economic growth.

Viral Acharya, Matthew Richardson, 25 October 2011

Macroprudential regulation aims to reduce systemic risk by correcting the negative externalities caused by breakdowns in financial intermediation. This column describes the shortcomings of the Dodd-Frank legislation as a piece of macroprudential regulation. It says the Act’s ex post charges for systemic risk don’t internalise the negative externality and its capital requirements may be arbitrary and easily gamed.

Arnoud Boot, 25 October 2011

The financial sector has become increasingly complex in terms of its speed and interconnectedness. This column says that market discipline won’t stabilise financial markets, and complexity makes regulating markets more difficult. It advocates substantial intervention in order to restructure the banking industry, address institutional complexity, and correct misaligned incentives.

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