Tatsuyoshi Okimoto, 13 June 2019

Japan’s monetary policy has had to be unconventional in order to address the economic conditions the country has faced. This column assesses the Bank of Japan’s exchange-traded fund purchasing programme, which has been repeatedly expanded in recent years. The purchases have achieved some positive results, propping up stock prices but also increasing real output and inflation. But, given the increased risks the Bank faces as its purchases have grown, the time to unwind has come.

Bruno Biais, Jean-Charles Rochet, Paul Woolley, 21 August 2014

The Global Crisis has intensified debates over the merits of financial innovation and the optimal size of the financial sector. This column presents a model in which the growth of finance is driven by the development of a financial innovation. The model can help explain the securitised mortgage debacle that triggered the latest crisis, the tech bubble in the late 1990s, and junk bonds in the 1980s. A striking implication of the model is that regulation should be toughest when finance seems most robust and when innovations are waxing strongly.

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