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Building an effective financial stability policy framework: lessons from the post-crisis decade

Demekas, Dimitri G. (2019) Building an effective financial stability policy framework: lessons from the post-crisis decade. . The London School of Economics and Political Science, London, UK, London, UK.

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Abstract

A decade after the global financial crisis, the task of building a financial stability policy framework has unfinished business. Fundamental questions about the goal of financial stability and the policies to achieve it were sidelined by the excessive focus on the minutiae of macroprudential policy. Increased responsibilities were given to central banks without a proper discussion about the right degree of delegation and accountability. A comprehensive framework for financial stability should have three pillars: macroprudential policy, microprudential supervision, and financial safety nets. Sufficient operational independence should be given to the agency(ies) responsible for financial stability but determining the goal, institutional architecture, and agency assignments, resolving any policy tradeoffs, and ensuring accountability should be a political responsibility. Even with the best framework, however, given the variety of structural, behavioral, and political economy factors affecting financial stability and our limited understanding of the financial system, securing this goal will remain a challenge.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/iga
Additional Information: © 2019 The Author
Divisions: Institute of Global Affairs
Subjects: H Social Sciences > HG Finance
H Social Sciences > HC Economic History and Conditions
JEL classification: G - Financial Economics > G1 - General Financial Markets > G10 - General
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
G - Financial Economics > G2 - Financial Institutions and Services > G20 - General
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
Date Deposited: 16 Apr 2019 15:03
Last Modified: 22 Jun 2019 23:24
URI: http://eprints.lse.ac.uk/id/eprint/100483

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