The impact of tighter regulatory capital requirements during an economic upswing is a key question in macroprudential policy. This column discusses research suggesting that an increase of 15 basis points in aggregate capital ratios of banks operating in the UK is associated with a median reduction of around 1.4% in the level of lending after 16 quarters. The impact on quarterly GDP growth is statistically insignificant, a result that is consistent with firms substituting away from bank credit and towards that supplied via bond markets.
Joseph Noss, Priscilla Toffano, 06 April 2014
Luigi Zingales, 28 January 2009
In 1933, US securities regulations were introduced to restore trust in financial markets. Today, a new regulatory focus is needed to address the crisis of confidence. After reviewing the status of financial regulation, this column sketches policy proposals in three key areas of securities markets.
Tomas Philipson , Eric Sun, 03 January 2008
From an economic perspective, two critical issues are the speed-safety tradeoff in drug approval and the overlap of regulation and product liability. Research on the US experience suggests that regulatory agencies have historically erred on the “safety” side of the speed-safety balance and there would be gains from better integration of government regulation and product liability laws.
Liam Brunt, 25 September 2007
Historical evidence from a natural experiment in South Africa suggests that changing particular institutions is really only tinkering at the economic margins. Establishing clear property rights, by contrast, facilitates almost all economic interactions and unleashes the full potential of the economy. Several developing economies – such as Vietnam and China – have recently been moving down this road, and history suggests that the economic gains are likely to be large.