Michael McMahon, Udara Peiris, Herakles Polemarchakis, 30 October 2012

‘Sterilisation’ - where purchases of assets by a central bank are offset by withdrawals - may help the ECB to control inflation. This column discusses how the ECB’s current approach may be fraught with danger, however. In a world where sovereign default risk is perceived to be likely, the ECB’s only real hope is that its approach makes a Eurozone default impossible.

Alan KIrman, 29 October 2012

The economic crisis has thrown the inadequacies of macroeconomics into stark relief. This column argues that the narrow conception of the macroeconomy as a system in equilibrium is problematic. Economists should abandon entrenched theories and understand the macroeconomy as self-organising. It offers detailed suggestions on what alternative ideas economists can teach their future students that better reflect empirical evidence.

M. Ayhan Kose, Marco Terrones, 18 October 2012

Bouts of elevated uncertainty have been one of the defining features of the sluggish recovery from the global financial crisis. This column explores the role of uncertainty in driving macroeconomic outcomes using data from a large group of advanced countries over the past 40 years. It concludes that uncertainty appears to hinder growth.

Hans Degryse, Santiago Carbó-Valverde, Francisco Rodríguez Fernández, 23 September 2012

This paper studies whether the involvedness of a firm’s main bank into different types of securitisation activity influences credit supply before and during the 2007-8 financial crisis. The authors find that, in general, a relationship with a bank that is more involved in securitisation activities relaxes credit constraints in normal periods. In contrast, while a relationship with a firm’s main bank that issues covered bonds reduces credit rationing during crisis periods, the issuance of asset-backed securities by a firm’s main bank aggravates these firms' credit rationing in crisis periods.

Simon Johnson, Peter Boone, 21 September 2012

Industrialised countries today face serious risks – for their financial sectors, for their public finances, and for their growth prospects. This column explains how, through our financial systems, we have created enormous, complex financial structures that can inflict tragic consequences with failure and yet are inherently difficult to regulate and control. It explains how this has happened and why there are more and worse crises to come.

Patrick Minford, Vo Phuong Mai Le, David Meenagh, 15 July 2012

This paper adds the Bernanke-Gertler-Gilchrist model to a modified version of the Smets-Wouters model of the US in order to explore the causes of the banking crisis. The authors find that banking crises occur on average once every 40 years and around half are accompanied by financial crisis. Financial shocks on their own, even when extreme, do not cause crises, provided the government acts swiftly to counteract such a shock.

Michael Bordo, Christopher Meissner, 24 March 2012

Did inequality in the US lead to the global financial crisis? This column presents evidence from 14 countries between 1920 and 2008 and argues that while inequality can be blamed for many things, the global crisis is not one of them.

Andrew Haldane, Vasileios Madouros, 22 November 2011

While few would argue that the financial crisis has not brought the real economy down with it, there is considerably less clarity about what the positive contribution of the financial sector is during normal times. This lead commentary in the current Vox debate on the issue focuses on the value-added of risk and government subsidies in national accounting, and makes an important distinction between risk-taking and risk management.

Dennis Snower, 29 July 2011

The first Global Economic Symposium (GES) took place in the early autumn of 2008. Dennis Snower, President of the Kiel Institute for the World Economy and GES Director, talks to Romesh Vaitilingam about its continuing efforts to bring together people from many professions, nations and cultures to develop solutions to a wide range of global challenges, including financial crises, climate change, poverty and such ‘tragedy of the commons’ phenomena as deforestation and overfishing. The interview was recorded in July 2011.

Stefano Micossi, 10 December 2010

Nightmares of the Eurozone are back to haunt policymakers. This column senses something surreal. The leaders scramble to prevent disaster at the last minute, only to be seen the next minute reverting back to the behaviour that brought them to the edge of despair in the first place. It argues that the Eurozone may be more in need of a psychiatrist than a financial guru.

John Quiggin, 03 December 2010

John Quiggin of the University of Queensland talks to Viv Davies about his recently published book, which describes some of the economic ideas that he believes played a role in creating the global financial crisis. He refers to the Great Moderation, the efficient markets hypothesis, DSGE, ‘trickle-down’ economics and privatisation as ‘zombie’ ideas, which should have been killed off by the financial crisis, yet for some reason still live on in the minds of many economists and policy-makers. The interview was recorded in London in November 2010. [Also read the transcript]

Max Bruche, Gerard Llobet, 09 August 2010

Bank bailouts have been controversial from the outset, with some commentators saying that they reward banks for making risky loans. This column investigates the idea of an asset buyback in which a special purpose vehicle buys bad loans from banks' balance sheets. It argues that these buybacks could be structured to avoid windfall gains.

Marco Leonardi, Giovanni Pica, Julián Messina, 04 March 2010

How do financial crises alter the effects of employment protection legislation? This column argues that firms with insufficient access to credit are even less able to rationalise their costs by switching from labour to capital – reinforcing the negative effects on productivity. But policymakers should also consider that, in countries with less-developed financial markets, employment protection provides insurance against labour-market risk.

Dirk Schoenmaker, 14 January 2010

There are calls to establish a separate resolution fund to deal with future financial crises. This column says such a fund is not desirable. It likely would be procyclical, counterproductive, and give a false sense of safety. Rather, governments should levy Pigouvian taxes on the financial system to address negative externalities.

Charles Goodhart, 17 December 2009

The structure of contracts in financial markets is deeply rooted in history. This column retraces the origins of financial contracting and explains why mutual fund banking proposals are wrong headed. It proposes to shift more of the functions of our current banking system away from limited liability back into partnerships. This would involve requiring hedge funds to be entirely separated from banks.

Prakash Kannan, 19 November 2009

Will the economic recovery be U-, V-, W-, or L-shaped? This column warns that recoveries from recessions caused by financial crises are slower than others, due to stressed credit conditions that persist even after output begins to recover. It thus recommends policies aimed at recapitalising financial institutions, resolving distressed financial assets, ensuring adequate provision of liquidity, and expediting bankruptcy proceedings.

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.



CEPR Policy Research