Download Market, Regulations and Finance: Global Meltdown and the by Ratan Khasnabis, Indrani Chakraborty PDF

By Ratan Khasnabis, Indrani Chakraborty

This volume’s fundamental contribution to the sphere of Economics is that it addresses the difficulty of inter-linkages among cash, finance and macroeconomics with a extensive analytical point of view that has commonality with the Post-Keynesians. In an try to check the results of financial reforms and the fallout of the worldwide monetary drawback on India and the realm round, the publication argues that with the onset of the hindrance, as in so much complex economies, debates and discussions in India were curious about 3 major matters: financial coverage and asset costs, monetary balance, and macro-prudential law. 3 comparable concerns that are additionally thought of very important within the Indian context are – rule vs. principle-based supervision, built-in monetary supervision, and regulatory and supervisory independence. The ebook argues that the situation highlighted the inadequacies of macro-prudential regulatory constitution which mostly addresses idiosyncratic dangers particular to person monetary associations. The problem triggered an intensive debate at the position of nationwide regulatory and supervisory specialists in situation prevention and challenge administration through macro-prudential rules which contains a normal equilibrium method of legislation aiming at safeguarding the economy as a complete. The publication then argues that the hindrance ended in a paradigm shift in macroeconomic concept and coverage. This shift has been labeled into 4 particular parts: financial coverage, monetary law, company governance, and globalization. The booklet analyses how the features of every of those 4 different types have replaced from the pre-crisis to the post-crisis scenario. The publication additionally delves into the phenomenon of emerging international commodity costs post-crisis. The publication additionally offers with an research of the influence of this main issue on employment within the US economic climate, by way of simulating a macroeconomic version constructed via the Cambridge division of utilized Economics within the 1980s.

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Additional resources for Market, Regulations and Finance: Global Meltdown and the Indian Economy

Example text

The crisis, however, has brought it into a much sharper focus. Even more importantly, the crisis brought about a shift of emphasis from micro-prudential regulation (essentially centred on a partial-equilibrium approach to regulation aimed at preventing the costly failure of individual financial institutions (FIs)) to macro-prudential regulation (constituting a general-equilibrium approach to regulation aimed at safeguarding the financial system as a whole). The string of successive failures of FIs in the USA and Europe subsequent to the Lehman collapse highlighted the inadequateness of a micro-prudential regulatory structure, geared to addressing idiosyncratic risks specific to individual FIs.

Most of these suggestions are some variants of the initial and maintenance margin requirements applicable to investors in equities,9 whereby the holder of a tranche in an asset-based security would be obligated to maintain a margin (or haircut in the financial markets’ jargon) depending on the seniority of the tranche (see Hanson et al.  16). C. Strengthening Prudential Standards: The crisis has also brought out the weaknesses in the existing prudential standards, which under Basel II, seem to have been exclusively focussed on capital requirements.

The recent global financial crisis has entered important caveats to such a benevolent view of financial liberalization. In fact, a general disillusionment seems to have set in with the philosophy of efficient financial markets resulting in a corresponding shift in attitudes to R&S issues, involving greater circumspection towards complex structured products and greater emphasis on prudential considerations. The extensive debates on these issues has slowly generated a nascent consensus among central banks, finance ministries and multilateral institutions relative to the desiderata for national R&S systems, if they were to be successful in maintaining systemic 2 Monetary Policy, Financial Stability and Macro-prudential Regulation 35 financial stability.

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