Tim Jackson, Laurence Kotlikoff, 30 August 2018

Financial crises have historically been triggered by news of financial malfeasance. Some economists advocate greater opacity for bankers to ensure investors keep the faith. This column models bankers as including a share of malfeasants who steal or lose investors’ money. Within this framework, deposit insurance makes matters worse and private monitoring fails due to free riding. The optimal policy is identified as full financial disclosure, which weeds out crooked bankers. 

Paul De Grauwe, 07 September 2015

Economists were early critics of the design of the Eurozone, though many of their warnings went unheeded. This column discusses some fundamental design flaws, and how they have contributed to recent crises. National booms and busts lead to large external imbalances, and without individual lenders of last resort – national central banks – these cycles lead some members to experience liquidity crises that degenerated into solvency crises. One credible solution to these design failures is the formation of a political union, however member states are unlikely to find this appealing.

Assaf Razin, Galina Hale, 08 August 2009

Finding reliable indicators that predict the likelihood and severity of crises across countries has been a frustrating quest for economists. This column suggests that countries with better creditor protection suffer less when a crisis hits.

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