Microeconomic regulation

Patrick Bolton, Stephen Cecchetti, Jean-Pierre Danthine, Xavier Vives, 03 June 2019

While the decade since the Global Crisis has seen clear improvements in financial regulation and supervision, there is still work to be done in several crucial areas, and political constraints may bite.This column introduces the first report in a new series on ‘The Future of Banking’, which tackles three important areas of post-crisis regulatory reform: the Basel III agreement on capital, liquidity and leverage requirements; resolution procedures to end ‘too big to fail’; and the expanded role of central banks with a financial stability remit.

Jonathan Ashworth, 08 February 2019

On 17 October 2018, Canada legalised recreational cannabis use, with an immediate effect on how Canadian people use cash. Jonathan Ashworth explains to Tim Phillips how legalisation crimps the black economy.

Charles Goodhart, Jonathan Ashworth, 22 January 2019

Canada is the first major developed nation to have legalised recreational cannabis use. This column argues that movements in cash in circulation around the time of legalisation seem to provide early evidence that Prime Minister Trudeau’s policy has already been successful in crimping the black economy. If around one-quarter of the cannabis market remains illegal, as recently estimated by Statistics Canada, over time legalisation could reduce the size of the total underground economy by around 4% or 5%.

Hans Koster, Jos van Ommeren, Nicolas Volhausen, 20 December 2018

Short-term rental platforms such as Airbnb have grown spectacularly in recent years, and local governments around the globe have responded differently in regulating such rentals. This column analyses the effects of a policy change in several cities of Los Angeles County that restricted short-term rentals of entire homes and apartments. Airbnb has led to an increase in house prices that is particularly pronounced in popular tourist areas, and homeowners in these areas lose out from the regulation. Renters, on the other hand, benefit from the regulation.

Dirk Hackbarth, Alejandro Rivera, Tak-Yuen Wong, 19 December 2018

For decades, academics and practitioners alike have argued that companies do not implement long-term strategies and that shareholders must cure the disease of short-termism to maximise shareholder value. This column examines the perils of short-termism in the context of investment policies and managers’ incentivisation. It finds that shareholder value maximisation for a typical S&P500 firm is not as straightforward as ‘no short-termism’, and depends on firm and investor characteristics.

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