Jon Danielsson, Hyun Song Shin, Jean-Pierre Zigrand, 11 March 2009

By incorporating endogenous risk into a standard asset-pricing model, this column shows how banks’ capacity to bear risk seemingly evaporates in the face of market turmoil, pushing the financial system further into a tailspin. It suggests that risk-sensitive prudential regulation, in the spirit of Basel II, makes systemic financial crises sharper, larger, and more costly.

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The MSc in Competition and Market Regulation provides participants with a rigorous training in competition policy and regulatory issues. A full understanding of how markets work and how they are regulated will be acquired through an in-depth analysis of the functioning of legal and economic institutions and an empirical preparation. Competition policy cases and regulation policy in specific sectors, such as telecommunications, energy, transportation and financial markets will be covered. For more information, please visit www.barcelonagse.eu/MCR.html

Axel Leijonhufvud, 13 January 2009

Following the analysis of the crisis’s causes in the yesterday’s column, this column suggests that the new financial regulatory system should impose effective reserve requirements on deposit-taking banks, and impose capital requirements for virtually all financial institutions with these requirements being counter-cyclical to dampen the boom-bust cycle.

Alan Ahearne, Juan Delgado, Jakob von Weizsäcker, 27 June 2008

Housing booms associated with credit booms are particularly damaging, but the ECB’s one-size-fits-all monetary policy is useless in pricking national bubbles. Euro area governments should use national banking regulations to dampen national bubbles and countercyclical housing taxes to prick bubbles that arise.

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