Hyun Song Shin, 18 March 2009

Did securitisation disperse risks? This column argues that it undermined financial stability by concentrating risk. Securitisation allowed banks to leverage up in tranquil times while concentrating risks in the banking system by inducing banks and other financial intermediaries to buy each other’s securities with borrowed money.

Luigi Spaventa, 28 January 2009

To fix the world financial system, the G20 needs to look at some bold institutional reforms. The column suggests an international financial stability charter backed up by an new institution that could either be ‘light’ with a slim secretariat, or more elaborate WTO-style organisation.

Roland Spahr, 18 November 2008

Globally integrated countries have suffered heavily from highly volatile stock markets during the current crisis. This column argues that globalised countries enjoy lower stock market risk in good times, but they suffer just as much in crises. Moreover, the transition to openness breeds financial instability. Policymakers need ways to manage these risk concerns.

Charles Goodhart, 24 June 2008

Central banks cannot achieve price and financial stability with one instrument (interest rates). A counter-cyclical regulatory system is needed to dampen asset booms and to smooth busting bubbles. To use such macro-prudential instruments effectively, regulators need courage, quantitative triggers, and independence; they will be criticised by lenders, borrowers and politicians in both booms and busts.

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.

Carmen Reinhart, 15 March 2008

We may just have started to feel the pain. Asset price drops – including housing – are common markers in all the big banking crises over the past 30 years. GDP declines after such crises were both large (-2% on average) and protracted (2 years to return to trend); in the 5 biggest crises, the numbers were -5% and 3 years. This column, based on the author’s testimony to the Congress, picks through the causes and consequences. It argues that when it comes to ‘cures,’ it would be far better to get the job done right than get the job done quickly.

Willem Buiter, 05 March 2008

This second column on the Treasury Committee’s report on lessons from Northern Rock discusses the institutional arrangements needed to cope should a bank of non-trivial size fail.

Willem Buiter, 04 March 2008

The UK Treasury Committee recently released a report on the lessons from the plight of Northern Rock. In the first of a two-column series, Willem Buiter analyses the shortcomings of the report’s recommendations for reducing problems in the banking and ‘shadow banking’ sectors.

Roger Ferguson, Philipp Hartmann, Fabio Panetta, Richard Portes, 15 November 2007

The ninth CEPR/ICMB Geneva Report on the World Economy examines the main threats to international financial stability, focusing on the implications of the major changes that have occurred in the global financial system in the past two decades.

Richard Portes, 15 November 2007

The global financial system shows signs of stress – turmoil, not a systemic financial crisis. Risk is being repriced and the unwinding will take some time. Now is the time to think carefully about longer-term reforms needed to improve the stability of the international financial system.

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.

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