Found 413 article(s) in category 'Q3: Financial Crisis?'

Three Challenges Facing Modern Macroeconomics

Three Challenges Facing Modern Macroeconomics. Kenneth Rogoff, Paper, September 21, 2010. “There are three great challenges facing researchers in modern macroeconomics today, all brought into sharp relief by the recent financial crisis. The first is to find more realistic, and yet tractable, ways to incorporate financial market frictions into our canonical models for analyzing monetary policy. The second is to rethink the role of countercyclical fiscal policy, particularly in the response to a financial crisis where credit markets seize. A third great challenge is to achieve a better cost‐benefit analysis of…” (May require user account or purchase) Link

Tags: , , ,

Basel Needs a Firm Hand and Fewer Delays

Basel Needs a Firm Hand and Fewer Delays. Jeremy Stein, David Scharfstein, September 13, 2010, Op-Ed. “This weekend top central bankers announced agreement on Basel III, the new rules to enhance global capital standards for banks. The agreement, which will now be presented to the Group of 20 leading nations summit in Seoul this November, represents a significant and welcome increase in the capital that banks will be required to hold. However, worries that a rapid transition will cut lending and deepen the global recession mean the full increase will be delayed until 2019. These transitional…” (May require user account or purchase) Link

Tags: , , ,

Causes of the Financial Crisis: Many Responsible Parties

Causes of the Financial Crisis: Many Responsible Parties. Richard Zeckhauser, June 2010, Paper. “This analysis argues that blame for the financial crisis falls specifically and heavily on a broad range of the private players and public regulators in our financial sector. Wall Street and the government joined hands in a situation of contributory negligence. Even recognizing the triggering event of the collapse of the subprime market, a key question arises: How did a relatively small loss – $1 billion in subprime mortgages – initiate such a gigantic loss amounting to $20 trillion? By contrast, the NASDAQ swoon of 2001-02, though entailing…” Link

Tags: , , , ,

Growth in a Time of Debt

Growth in a Time of Debt. Carmen M. Reinhart, Kenneth Rogoff, May 2010, Paper. “In this paper, we exploit a new multi-country historical dataset on public (government) debt to search for a systemic relationship between high public debt levels, growth and inflation. Our main result is that whereas the link between growth and debt seems relatively weak at “normal” debt levels, median growth rates for countries with public debt over roughly 90 percent of GD? are about one percent lower than other wise: average (mean) growth rates are several percent lower. Surprisingly, the relationship between public debt and…” Link

Tags: , ,

Fiscal adjustments: lessons from recent history

Fiscal adjustments: lessons from recent history. Alberto Alesina, April 2010, Paper. “In the aftermath of the Great Recession, many OECD countries now need to reduce large public sector deficits and debts. This is not the first time that the “world” faces this problem. It happened in an even more dramatic fashion in the past century after the first and second world wars. In the first case, several episodes of large inflation (e.g. France) or hyperinflation (e.g. Austria Germany Hungary) wiped out the debts partly or completely, and in other cases…” Link

Tags: , ,

The Politics of Monetary Policy

The Politics of Monetary Policy. Alberto Alesina, April 2010, Paper.“In this paper we critically review the literature on the political economy of monetary policy, with an eye on the questions raised by the recent financial crisis. We begin with a discussion of rules versus discretion. We then examine the issue of Central Banks independence both in normal times, in times of crisis. Then we review the literature of electoral manipulation of policies. Finally we address international institutional issues concerning the feasibility, optimality and political sustainability of currency unions…” Link

Tags: , ,

The Squam Lake Report: Fixing the Financial System

The Squam Lake Report: Fixing the Financial System. John Campbell, Jeremy Stein, 2010, Book. “In the fall of 2008, fifteen of the world’s leading economists–representing the broadest spectrum of economic opinion–gathered at New Hampshire’s Squam Lake. Their goal: the mapping of a long-term plan for financial regulation reform. The Squam Lake Report distills the wealth of insights from the ongoing collaboration that began at these meetings and provides a revelatory, unified, and coherent voice for fixing our troubled and damaged financial markets. As an alternative to the patchwork...” (May require user account or purchase) Link

Tags: , ,

Investing in the Unknown and Unknowable

Investing in the Unknown and Unknowable. Richard Zeckhauser, 2010, Book Chapter, “David Ricardo made a fortune buying bonds from the British government four days in advance of the Battle of Waterloo. 1 He was not a military analyst, and even if he were, he had no basis to compute the odds of Napoleon’s defeat or victory, or hard-to-identify ambiguous outcomes. Thus, he was investing in the unknown and the unknowable. Still, he knew that competition was thin, that the seller was eager, and that his windfall pounds should Napoleon lose would be worth much more than the pounds he’d lose should Napoleon win. Ricardo knew a good bet when he saw it.” Link

Tags: ,

Global Imbalances and the Financial Crisis: Products of Common Causes

Global Imbalances and the Financial Crisis: Products of Common Causes, Kenneth Rogoff, October 2009, Paper. “Until the outbreak of financial crisis in August 2007, the mid-2000s was a period of strong economic performance throughout the world. Economic growth was generally robust; inflation generally low; international trade and especially financial flows expanded; and the emerging and developing world experienced widespread progress and a notable absence of crises. This apparently favorable equilibrium was underpinned, however, by three trends that appeared increasingly unsustainable as time went by…” Link

Tags: , ,

Economic Catastrophe Bonds

Economic Catastrophe Bonds. Joshua D. Coval, Erik Stafford,  June 2009, Paper. “The central insight of asset pricing is that a security’s value depends on both its distribution of payoffs across economic states and state prices. In fixed income markets, many investors focus exclusively on estimates of expected payoffs, such as credit ratings, without considering the state of the economy in which default is likely to occur. Such investors are likely to be attracted to securities whose payoffs resemble those of economic catastrophe bonds – bonds that default only under severe economic conditions…” Link

Tags: , , , , , , , ,