The Editors, 07 July 2008

A book of Vox columns on the subprime crisis is posted today for free downloading. Edited by Andrew Felton and Carmen Reinhart, the collection brings together the best columns on this fast moving issue as well as providing a timeline of the crisis and a glossary.

Nicholas Bloom, 04 June 2008

The credit crunch has produced significant volatility in the stock market. This column argues that the wave of uncertainty troubling the markets will likely induce a recession – and render policy instruments powerless to prevent it.

Daniel Cohen, 03 June 2008

What easy money brought forth in the new century, tight credit will take away in the years to come. Here one of France’s leading economists explains the origins of the subprime crisis and why it is likely to continue to unfold.

Francesco Giavazzi, 02 June 2008

Editor's Note: Originally posted 2 June 2008. There has been a persistent spread between the rate at which banks lend each other money and government-backed securities yields in recent months. This column describes hypotheses explaining the spread – including the possibility that banks aren’t lending in order to bankrupt acquisition targets.

Michael Orlando, 24 May 2008

The financial crisis has put the US Federal Reserve’s performance under the spotlight. As the United States reassesses its financial regulatory system, this column makes the case for central bank independence.

Willem Buiter, 17 May 2008

In CEPR Policy Insight No.24, Willem Buiter asks: Does it matter if a central bank suffers a large capital loss? Can the central bank become insolvent? How and by whom should the central bank be recapitalised, should its capital be deemed insufficient?

Richard Baldwin, 08 May 2010

This column, first posted 17 May 2008, reviews Willem Buiter's analysis of why the ECB is so hesitant to buy debt. Central banks can go broke – and some in developing countries have done so recently. The ECB is now lending against dubious collateral. An ECB recapitalisation seems unthinkable at the moment, but that’s why it is a good time to think the unthinkable. Willem Buiter considers the question at length in CEPR Policy Insight No. 24 and argues that Eurozone fiscal authorities should, ASAP, agree on a formula for fiscal burden-sharing should an ECB recapitalisation ever be necessary.

Axel Leijonhufvud, 13 May 2008

In CEPR Policy Insight No. 23, Axel Leijonhufvud asks not what we have learnt, but what we should have learnt from Keynes in light of the current financial turmoil.

Axel Leijonhufvud, 13 May 2008

The US Federal Reserve has used unorthodox policy instruments to reduce recent financial turmoil. In this column, the author of CEPR Policy Insight 23 argues that the crisis raises more fundamental questions about core tenets of modern monetary orthodoxy – inflation targeting and central bank independence.

Jon Danielsson, 08 May 2008

In response to financial turmoil, supervisors are demanding more risk calculations. But model-driven mispricing produced the crisis, and risk models don’t perform during crisis conditions. The belief that a really complicated statistical model must be right is merely foolish sophistication.

Luigi Spaventa, 07 May 2008

A prolonged situation of financial distress, which has now lasted for almost a year, is debilitating the financial system. In CEPR Policy Insight 22, Luigi Spaventa examines possible solutions to the immediate and urgent problems.

Luigi Spaventa, 08 May 2008

The global financial system may be caught in a downward spiral as market and funding illiquidity reinforce each other. The author of CEPR Policy Insight 22 presents a radical proposal that would break the feedback loop by not valuing illiquid assets at market prices under crisis conditions.

Avinash Persaud, 01 May 2008

Financial regulation never works the way it should. Here one of the world’s most experienced analysts of the global financial system presents some remarkably clear thinking on why we should not just do more of the same. An alternative model for policy action is proposed.

Carmen Reinhart, 05 May 2010

This column, first posted 19 April 2008, argues that sovereign debt crises have historically followed financial crises. Although data covering only the last thirty years might have given few hints about Greece's current problems, the Reinhart-Rogoff database spanning eight centuries reveals that today's event are very much in line with historical experience.

Stephen Cecchetti, 10 April 2008

The nature of the ongoing financial turmoil that began in August 2007 has rendered traditional monetary policy responses ineffective. This column summarises the US Federal Reserve’s response to the crisis.

Thorvaldur Gylfason, 07 April 2008

Recent events have commentators discussing whether Iceland is in danger of an economic meltdown. This column examines the situation in detail, explaining the sources of today’s financial woes and why, despite serious need for reform, Iceland’s fundamentals are strong.

Avinash Persaud, 04 April 2008

Financial supervision arguably failed to prevent today’s turmoil because it relied upon the very price-sensitive risk models that produced the crisis. This column calls for an ambitious departure from trends in modern financial regulation to correct the problem.

Javier Suarez, 27 March 2008

In a new CEPR Policy Insight, Javier Suarez proposes the creation of an Emergency Bank Debt Insurance Mechanism as an alternative to the massive lending of last resort operations undertaken by central banks since the start of the subprime crisis.

Xavier Vives, 31 March 2008

The current crisis is a modern form of a traditional banking crisis. The 125-year-old Bagehot's doctrine tells us how governments should react – lend to solvent but illiquid financial institutions. While easy to state, the doctrine is hard to apply. The key question to assess the future consequences of current central bank policy is whether the subprime mortgage crisis arises in the context of a moderate or a severe underlying moral hazard problem.

Guido Tabellini, 19 March 2008

The recent financial trouble has prompted much examination of private financial institutions, but few have asked why regulatory supervision did not prevent the crisis. This column argues that supervisory failure was also due to regulatory competition between national authorities and calls for a consolidated EU authority.

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