Baker, Andrew (2015) The bankers’ paradox: the political economy of macroprudential regulation. Systemic Risk Centre Discussion Papers (37). Systemic Risk Centre, The London School of Economics and Political Science, London, UK.
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Abstract
Macroprudential regulation, which has emerged as a new departure in financial regulation (albeit with a longer heritage), since the financial crash, is in a fluid, evolving and highly experimental phase. Understanding its future political economy requires engaging with macroprudential's constituent concepts and how they interrelate to one another. This paper argues that the emerging political economy of macroprudential regulation revolves around five paradoxes. The first three of these are paradoxes that characterise the financial system and are identified by the macroprudential perspective. In seeking to respond to these paradoxes, macroprudential policy, generates a further two distinctly institutional and political paradoxes. The last of these is a central bankers' paradox which relates to the source of independent central bank authority and the difficulty of building legitimacy and public support for macroprudential regulation. Functioning macroprudential regulation is about executing a technocratic control project that rests on a depoliticisation strategy, that in turn risks politicising central banks, exposing their claims to technical authority to critical scrutiny and potential political backlash. This is the ultimate central bankers’ paradox in the era of post-crash political economy. Central banks conducting macroprudential regulation need to be aware of this paradox and handle it with great care.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | https://www.systemicrisk.ac.uk/ |
| Additional Information: | © 2015 The Author |
| Divisions: | Systemic Risk Centre |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook |
| Date Deposited: | 19 May 2015 09:52 |
| Last Modified: | 15 Sep 2023 23:35 |
| Projects: | ES/K002309/1 |
| Funders: | Economic and Social Research Council |
| URI: | http://eprints.lse.ac.uk/id/eprint/61998 |
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