Javier Suarez, Enrico Perotti, 07 November 2009

Liquidity risk charges were proposed in February 2009 as a new macro-prudential tool to discourage systemic risk creation by banks. CEPR Policy Insight No. 40 refines this proposal in order to clarify challenging issues surrounding the implementation of liquidity risk charges.

Carmen Reinhart, Vincent Reinhart, 22 August 2009

Developed economies are implementing massive fiscal stimulus packages. Should emerging economies? This column warns them that fiscal multipliers are not certain, financing budget deficits will not be easy, the risk of default looms, and central bank independence may be eroded.

Daniel Gros, Stefano Micossi, Jacopo Carmassi, 13 August 2009

Why is there so much disagreement about the causes of the crisis? This column says that lax monetary policy and excessive leverage are to blame. It argues that many alleged causes are simply symptoms of these policy errors. If that is correct, then the recommended corrective is remarkably simple – there is no need for intrusive regulatory measures constraining non-bank intermediaries and innovative financial instruments.

Donato Masciandaro, María Nieto, Marc Quintyn, 11 August 2009

The impact of the current financial crisis on EU members has introduced a sense of urgency to the coordination/centralization of financial supervision debate. This CEPR Policy Insight on the micro-prudential supervisory framework.

Donato Masciandaro, María Nieto, Marc Quintyn, 11 August 2009

The financial crisis introduced a sense of urgency to the debate on the desirable structure of financial supervision in the EU. This column, which accompanies a new CEPR Policy Insight, provides two policy recommendations. First, policymakers could consider the harmonisation of supervisors´ governance arrangements. Second, consideration should be given to the introduction of a European mandate for national supervisors in order to better align incentives in the EU supervisory framework for micro-prudential supervision.

Zsolt Darvas, 23 July 2009

The crisis has revealed the serious asymmetry of unpunished fiscal profligacy in euro-area member countries and painful austerity in euro-area applicant countries. This column argues that the stakes are now very high and euro-area members ought to change the entry criteria to make them more reasonable.

David Brackfield, Joaquim Oliveira Martins, 11 July 2009

Most narratives of the crisis start with problems in the financial sector that then spilled over into the real economy. This column looks at the real side first and shows that labour productivity growth declined significantly in the years prior to the crisis, particularly in the US construction sector. Financial markets may have failed in that they didn’t detect the deterioration of structural productivity trends in the early 2000s.

Francesco Columba, Wanda Cornacchia, Carmelo Salleo, 01 July 2009

As discussed in the first column in this series, greater leverage and incentives encouraging managers to take excessive risks drove a pro-cyclical new financial accelerator. This column discusses policy options to keep those forces in check.

Francesco Columba, Wanda Cornacchia, Carmelo Salleo, 30 June 2009

The current crisis has made obvious the power of the financial sector to amplify business cycle dynamics. This column, the first half of a series, focuses on how leverage, capital regulation, and managers’ incentives contributed to the crisis.

Daniel Gros, 11 June 2009

Why should the existence of current account “imbalances” provoke the biggest financial crisis in living history? This column says one has to take into account the way current account deficits are financed and how flow imbalances accumulated into large stock disequilibria. It explains the securitisation leading to the crisis as the product of a maturity mismatch between foreign savers seeking short-term assets and excess supply of long-term US mortgage debt.

Con Keating, 02 June 2009

The desire to regulate to avoid repeating this financial crisis is commendable, but this column says that the haste with which new regulations are being promulgated is unnecessary and dangerous. Precursory analysis that is incomplete, incorrect, or inadequate creates substantial potential for unintended consequences. We should take the time to appropriately analyse, design, and implement new regulation.

Nicolas Véron, 30 May 2009

Some blame poor accounting standards for the crisis, and many now place accounting reform atop the global agenda. But the International Accounting Standards Board suffers significant institutional weaknesses, this column argues. While the International Financial Reporting Standards are not doomed to failure, there is significant risk of globally fragmented and divergent accounting standards, which would be a loss for everyone.

Stijn Claessens, M. Ayhan Kose, Marco Terrones, 22 May 2009

Many analysts suggest the economic recovery may have started but others worry that the sorry state of developed countries’ financial systems will prolong the recession. Can economic activity revive absent a recovery in credit and housing markets? This column presents new research suggesting that a “creditless recovery” is possible, but it would likely be slow and shallow.

John Cotter, 19 May 2009

Each economy has suffered a unique variant of the global financial crisis. This column details the perilous situation facing Ireland’s banking and property sectors. It says that the government responded poorly, particularly early in the crisis. Most indicators remain quite negative, though there are glimmers of evidence that the economy may begin to improve.

Pablo Antolin, Fiona Stewart, 01 May 2009

The current crisis has reduced the value of retirement assets by nearly 25%. This column examines policymakers’ reponses to the impact of the financial crisis on global pension assets in light of international best practices, highlights the continued importance of private pensions, and suggests ways to improve the regulation, supervision, design and management of these funds.

Charles Goodhart, 24 April 2009

The crisis has spawned a handful of books on how to fix the world’s financial system. This column reviews the NYU Stern book edited by Viral Acharya and Matthew Richardson. It says that the book’s prologue on “The Financial Crisis of 2007-8: Causes and Remedies” is the best single paper yet written on the background and development of the crisis.

Alberto Alesina, Paola Giuliano, 23 April 2009

Will Americans turn into “inequality intolerant” Europeans? Such a radical shift is unlikely, but this column argues that this crisis may be a turning point towards more government intervention and redistribution in the US. More and more Americans believe that hard work is insufficient to climb the income ladder and are expressing anger against “unfairly” accumulated wealth. Politicians should prefer wise policies but may be tempted by populist outbursts.

Heiko Hesse, Brenda González-Hermosillo, 21 April 2009

This column examines the use of key global market conditions to assess financial volatility and the likelihood of crisis. Using Markov regime-switching analysis, it shows that the Lehman Brothers failure was a watershed event in the crisis, although signs of heightened systemic risk could be detected as early as February 2007.

Jon Danielsson, 25 March 2009

Many are calling for significant new financial regulations. This column says that if the “regulate everything that moves” crowd has its way, we will repeat past mistakes and impose significant costs on the economy, to little or no benefit. The next crisis is years away – we have time to do bank regulation right.

Michael Dooley, Peter Garber, 21 March 2009

This column argues that current account imbalances, easy US monetary policy, and financial innovation are not the causes to blame for the global crisis. It says that attacking Bretton Woods II as a major cause of the crisis is an attack on the world trading system and a sure way to metastasise the crisis in the global financial system into a crisis of the global economic system.

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