Pub Date : 2019-03-29DOI: 10.4337/9781788973656.00009
C. Goodhart, A. Kashyap, D. Tsomocos, Alexandros P. Vardoulakis
In this companion paper to Goodhart et al. (2012), we explore the interactions of various types of financial regulation. We find that regulations that control fire-sale risk are critical for delivering financial stability and improving the welfare of savers and borrowers. We describe the combinations of capital regulations, margin requirements, liquidity regulation, and dynamic provisioning that are most effective in this respect. A policy featuring margin requirements together with countercyclical capital requirements delivers equal or better outcomes for the economy than does an unregulated financial system. But it is easy to produce combinations of regulation that look sensible but, when combined, have adverse effects on the economy.
{"title":"An Integrated Framework for Analyzing Multiple Financial Regulations","authors":"C. Goodhart, A. Kashyap, D. Tsomocos, Alexandros P. Vardoulakis","doi":"10.4337/9781788973656.00009","DOIUrl":"https://doi.org/10.4337/9781788973656.00009","url":null,"abstract":"In this companion paper to Goodhart et al. (2012), we explore the interactions of various types of financial regulation. We find that regulations that control fire-sale risk are critical for delivering financial stability and improving the welfare of savers and borrowers. We describe the combinations of capital regulations, margin requirements, liquidity regulation, and dynamic provisioning that are most effective in this respect. A policy featuring margin requirements together with countercyclical capital requirements delivers equal or better outcomes for the economy than does an unregulated financial system. But it is easy to produce combinations of regulation that look sensible but, when combined, have adverse effects on the economy.","PeriodicalId":447164,"journal":{"name":"Financial Regulation and Stability","volume":"97 6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128000362","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-29DOI: 10.4337/9781788973656.00016
C. Goodhart, M. U. Peiris, D. Tsomocos
We study a monetary economy with two large open economies displaying net real and financial flows. If default on cross-border loans is possible, taxing financial flows can reduce its negative consequences. In doing so it can improve welfare unilaterally, in some cases in a Pareto sense, via altering the terms of trade and reducing the costs of such default.
{"title":"Global Imbalances and Taxing Capital Flows","authors":"C. Goodhart, M. U. Peiris, D. Tsomocos","doi":"10.4337/9781788973656.00016","DOIUrl":"https://doi.org/10.4337/9781788973656.00016","url":null,"abstract":"We study a monetary economy with two large open economies displaying net real and financial flows. If default on cross-border loans is possible, taxing financial flows can reduce its negative consequences. In doing so it can improve welfare unilaterally, in some cases in a Pareto sense, via altering the terms of trade and reducing the costs of such default.","PeriodicalId":447164,"journal":{"name":"Financial Regulation and Stability","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127227291","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.4337/9781788973656.00015
M. Udara Peiris
{"title":"International monetary equilibrium with default","authors":"M. Udara Peiris","doi":"10.4337/9781788973656.00015","DOIUrl":"https://doi.org/10.4337/9781788973656.00015","url":null,"abstract":"","PeriodicalId":447164,"journal":{"name":"Financial Regulation and Stability","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115190344","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.4337/9781788973656.00005
N. Dougherty, Elizabeth Moselle, Megan A. O'Connell
{"title":"Introductions","authors":"N. Dougherty, Elizabeth Moselle, Megan A. O'Connell","doi":"10.4337/9781788973656.00005","DOIUrl":"https://doi.org/10.4337/9781788973656.00005","url":null,"abstract":"","PeriodicalId":447164,"journal":{"name":"Financial Regulation and Stability","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121577840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.4337/9781788973656.00012
J. Martinez S.
{"title":"Liquidity and default in an exchange economy","authors":"J. Martinez S.","doi":"10.4337/9781788973656.00012","DOIUrl":"https://doi.org/10.4337/9781788973656.00012","url":null,"abstract":"","PeriodicalId":447164,"journal":{"name":"Financial Regulation and Stability","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131162283","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.4337/9781788973656.00011
S. Bhattacharya, C. Goodhart, D. Tsomocos, Alexandros P. Vardoulakis
The worst and longest depressions have tended to occur after periods of prolonged, and reasonably stable, prosperity. This results in part from agents rationally updating their expectations during good times and hence becoming more optimistic about future economic prospects. Investors then increase their leverage and shift their portfolios towards projects that would previously have been considered too risky. So, when a downturn does eventually occur, the financial crisis, and the extent of default, become more severe. Whereas a general appreciation of this syndrome dates back to Minsky [1992, Jerome Levy Economics Institute, WP 74] and even beyond, to Irving Fisher [1933, Econometrica 1, 337-357], we model it formally. In addition, endogenous default introduces a pecuniary externality, since investors do not factor in the impact of their decision to take risk and default on the borrowing cost. We explore the relative advantages of alternative regulations in reducing financial fragility, and suggest a novel criterion for improvement of aggregate welfare.
{"title":"A Reconsideration of Minsky’s Financial Instability Hypothesis","authors":"S. Bhattacharya, C. Goodhart, D. Tsomocos, Alexandros P. Vardoulakis","doi":"10.4337/9781788973656.00011","DOIUrl":"https://doi.org/10.4337/9781788973656.00011","url":null,"abstract":"The worst and longest depressions have tended to occur after periods of prolonged, and reasonably stable, prosperity. This results in part from agents rationally updating their expectations during good times and hence becoming more optimistic about future economic prospects. Investors then increase their leverage and shift their portfolios towards projects that would previously have been considered too risky. So, when a downturn does eventually occur, the financial crisis, and the extent of default, become more severe. Whereas a general appreciation of this syndrome dates back to Minsky [1992, Jerome Levy Economics Institute, WP 74] and even beyond, to Irving Fisher [1933, Econometrica 1, 337-357], we model it formally. In addition, endogenous default introduces a pecuniary externality, since investors do not factor in the impact of their decision to take risk and default on the borrowing cost. We explore the relative advantages of alternative regulations in reducing financial fragility, and suggest a novel criterion for improvement of aggregate welfare.","PeriodicalId":447164,"journal":{"name":"Financial Regulation and Stability","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115984812","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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