Stephen Cecchetti, 28 November 2007

The second essay in this 4-part series discusses the lesson from the Bank of England’s recent experience, arguing that a lender of last resort is no substitute for a well-designed deposit insurance mechanism.

Stephen Cecchetti, 26 November 2007

Here is the first in a series of 4 essays exploring the lessons from the subprime turmoil. It sets the stage for the series, arguing that financial crises are intrinsic to the modern economy, but both individuals and governments should make adjustments to reduce the frequency of financial crises and their impact on the broader economy.

Charles Calomiris, 23 November 2007

The Subprime troubles caused a liquidity shock, but there is little reason to believe that a substantial decline in credit supply under the current circumstances will magnify the shocks and turn them into a recession. We have not (yet) arrived at a Minsky moment.

Stephen Cecchetti, 18 November 2007

To reduce the chances of another subprime-like crisis without stifling innovation, financial market regulators should work to increase standardization of securities, especially derivate instruments, and encourage their trade on organised exchanges.

Paul De Grauwe, 14 November 2007

Inflation targeting proponents view central banks’ responsibilities as minimalist. But the subprime crisis shows that central banks cannot avoid taking responsibilities that include the prevention of bubbles and the supervision of all institutions that are in the business of creating credit and liquidity.

Alberto Giovannini, Luigi Spaventa, 05 November 2007

The Basel Committee on Banking Supervision and the Basel II framework were intended to mitigate or prevent crises like the subprime mess. The valuation practices and market transparency recommended by the Committee fall short of what is needed.

Axel Leijonhufvud, 26 October 2007

Here's some deep thinking on the linkages between monetary policy and financial instability. The trouble with inflation targeting in present circumstances is that constant inflation gives you no information about whether your monetary policy has hit the Wicksellian ‘natural rate’. Inflation targeting might mislead us into pursuing a policy that is actively damaging to financial stability.

Guillermo de la Dehesa, 19 October 2007

Uneven supervision gave an edge to risk takers in some nations on the up side, but the pain is being felt all around Europe on the downside. To avoid future crises, all mortgage originators should be regulated, banks should have to retain their “equity” or first loss risk, the rating agencies should be more transparent and independent, and Europe’s coordination failure among national supervisors should be fixed.

Vasso Ioannidou, Steven Ongena, José-Luis Peydró, 17 October 2007

Do low levels of short-term interest encourage risk-taking that can be considered ‘excessive’? Do low interest rates imply higher credit risk in the short-run? In the medium-run? New empirical research suggests that the answers are a resounding ‘yes’, a subtle ‘no’ and a qualifying ‘it depends’.

Stephen Cecchetti, 15 August 2007

A revised and updated version of the 13 August column on the basic how's and why's of what the Fed has been doing to calm financial markets.


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