As discussed in the first column in this series, greater leverage and incentives encouraging managers to take excessive risks drove a pro-cyclical new financial accelerator. This column discusses policy options to keep those forces in check.
Francesco Columba, Wanda Cornacchia, Carmelo Salleo, 01 July 2009
Francesco Columba, Wanda Cornacchia, Carmelo Salleo, 30 June 2009
The current crisis has made obvious the power of the financial sector to amplify business cycle dynamics. This column, the first half of a series, focuses on how leverage, capital regulation, and managers’ incentives contributed to the crisis.
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