By Richard Barwell
This ebook experiences the most important coverage debates through the post-crash period, describing the problems that policymakers grappled with, the selections that they took and the main points of the coverage tools that have been created. It focuses in particular at the coverage regimes on the epicentre of the obstacle: micro- and macro-prudential coverage with chapters exploring the revolution within the behavior of macroeconomic coverage within the interval because the monetary main issue. the writer indicates that all through this era policymakers have needed to stability conflicting ambitions – to fix stability sheets within the banking and public sectors when at the same time attempting to catalyse an monetary restoration – and that has required them to innovate new instruments or even new coverage regimes in reaction. This ebook is going in the back of the jargon and explains what precisely policymakers on the financial institution of britain, the Treasury and past did and why, from QE to austerity to Basel III.
Read or Download Macroeconomic Policy after the Crash: Issues in Microprudential and Macroprudential Policy PDF
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Extra resources for Macroeconomic Policy after the Crash: Issues in Microprudential and Macroprudential Policy
The financial markets rely on the release of accurate, consistent and timely information if they are to deliver an efficient and equitable outcome. However, the application of this principle appears to limit a bank’s capacity to provision against losses which it believes it might incur in the future. Only in those situations where banks could point to a specific event which suggested a default was likely was the decision to provision uncontroversial. As a result, banks may be unable to prepare in a boom for losses that they think might arise in a bust.
The default approach to thinking about developments in financial markets almost surely influenced the focus of policymakers—if you believed that financial markets were efficient, that pricing anomalies would be arbitraged away, that agents were rational and well-informed—then you would not likely spend much time looking for problems that were unlikely to exist; in effect out of mind, and therefore out of sight too. The former Chairman of the Financial Services Authority Lord Adair Turner has identified the paradigm 38 Macroeconomic Policy after the Crash problem as a key factor in the failure of the pre-crisis policy regime to respond to events (Turner 2009b): We need to build a more stable system for the future.
Beyond cost savings, the British enjoy another advantage: While our regulatory bodies are often competing to be the toughest cop on the street, the British regulatory body seems to be more collaborative and solutions-oriented. That race to the bottom is a classic example of a coordination problem, with each actor taking what they believed to be privately rational actions, and illustrates the need for a global regulatory response to the crisis, to create a level playing field. ’ Johnson and Kwak argue that Wall Street was able to neuter effective reform and regulation of the system in boom and bust, and convince politicians of the imperative of bailouts in the nadir of the crisis and then lobby against more intrusive regulation in the years that followed.