Stephen Cecchetti, Kim Schoenholtz, 27 September 2017

Financial firms have paid fines totalling more than $9 billion for manipulating LIBOR, yet this flawed benchmark has not been replaced. This column argues that there are reduced incentives for banks to participate in setting the LIBOR rate, and so the potential of, and incentives for, manipulation remain. Although LIBOR is unsustainable, international regulators are working to produce more robust alternatives and to smooth the transition.

Christian Schubert, 22 January 2016

Nudges are modifications of people’s choice architecture that impact their behaviour but don’t change their incentives or coerce them. As a policy instrument, nudges have been shown to be effective in changing certain kinds of behaviours. This column explores the ethical issues that arise in employing such potentially manipulative policies. An evaluation programme is outlined that explores a potential policy’s impact on people’s wellbeing, autonomy, and integrity, along with its practical implications.

Darrell Duffie, Piotr Dworczak, Haoxiang Zhu, 16 February 2015

Trillions of dollars’ worth of transactions depend on financial benchmarks such as LIBOR, but recent scandals have called their reliability into question. This column argues that reliable benchmarks reduce informational asymmetries between customers and dealers, thereby increasing the volume of socially beneficial trades. Indeed, the increase in trading volume may offset the reduction in profit margins, giving dealers who can coordinate an incentive to introduce benchmarks. The authors argue that benchmarks deserve strong and well-coordinated support by regulators around the world.

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