Advertisement

A Pigovian Approach in a Globalizing Financial Industry

  • Luc Nijs

Abstract

In this chapter I will be exploring the application of the Pigovian theory to an industry that is known for its many particularities. The financial industry has become the poster child for everything that resembles globalization, i.e. interconnectedness and the risks that it produces, increased competitiveness and an industry that is constantly fueled by innovations of all sorts. It has also received lots of attention from regulators. In that sense, the financial industry is a typical ‘command-and-control’-regulated type of industry. That in itself makes sense. The financial industry is a private industry, but to a large degree it exercises a public function: that of managing deposits and subsequently the effective functioning of the credit intermediation process between the demand and supply of capital in the real economy. Not surprisingly, regulators in the different countries, and in more recent decades the EU, have been concerned about the trade-off between the private interest of share- and bondholders in banks on the one hand and the public interest of credit intermediation and deposit management on the other.

Keywords

Financial Institution Systemic Risk Banking Sector Liquidity Risk Tail Risk 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

  1. 1.
    Ph. Stevens, (2014), Nothing Can Dent the Divine Right of Bankers, Financial Times, January 16.Google Scholar
  2. 2.
    L. Nijs, (2011), Shaping Tomorrow’s Marketplace: Investment Philosophies for Emerging Markets and a Semi-Globalized World, Euromoney, London, pp. 145–159.Google Scholar
  3. 3.
    H. Gribnau, (2007), Soft Law and Taxation: The Case for the Netherlands, Legisprudence, Vol. 1, Issue 3, pp. 296–297.CrossRefGoogle Scholar
  4. H. Gribnau, (2008), Soft Law and Taxation: EU and International Aspects, Legisprudence, Vol. 2, Issue 2, pp. 67–117.CrossRefGoogle Scholar
  5. 4.
    L. Senden, (2005), Soft Law, Self-Regulation and Co-Regulation in European Law: Where Do They Meet?, Electronic Journal of Comparative Law, Vol. 9, p. 17.Google Scholar
  6. U Mörth (ed.), (2004), Soft Law in Governance and Regulation: An Interdisciplinary Analysis, Edward Elgar Publishing, Cheltenham.Google Scholar
  7. 9.
    L. Nijs, (2014), Mezzanine Financing: Tools, Applications and Total Return, Wiley & Sons, London, in general, but in particular the chapter on FIs.Google Scholar
  8. 11.
    J. Danielsson, (2002), The Emperor has No Clothes: Limits to Risk Modeling, Journal of Banking and Finance, Vol. 26, pp. 1273–1296.CrossRefGoogle Scholar
  9. N. N. Taleb, (2010), The Black Swan: The Impact of the Highly Improbable, 2nd Ed., Random House Trade paperbacks, New York.Google Scholar
  10. 13.
    Consider also the permanent updates the BIS provides clarifying many technical issues: BIS, (2014), FAQs on Basel III’s January Liquidity Coverage Ratio.Google Scholar
  11. BIS, (2012), FAQs on Counterparty Credit Risk and Exposures to Central Counterparties.Google Scholar
  12. BIS, (2011), FAQs Regarding the Definition of Capital, and BIS, (2011), FAQs Regarding the Framework for Liquidity.Google Scholar
  13. 15.
    M. A. Centeno and J. N. Cohen, (2012), The Arc of Neo Liberalism, Annual Review of Sociology, Vol. 38, pp. 317–340.CrossRefGoogle Scholar
  14. 18.
    In the City of London, the financial sector accounted for 40% of all UK corporate income tax revenues in the years running up to the crisis. This has fallen, but its corporate tax contributions still account for about 10% of all tax UK tax revenues (2010), and far beyond that taking into account VAT etc. For details see: PWC, (2010), The Total Tax Contribution of UK Financial Services, 3rd ed., London.Google Scholar
  15. 19.
    B. L. Garrett, (2014), Too Big to Jail: How Prosecutors Compromise with Corporations, Harvard University Press, Cambridge, MA.CrossRefGoogle Scholar
  16. 22.
    B. Őztürk and M. Mrkaic, (2014), SME’s Access to Finance in the Euro Area: What Helps or Hampers, IMF Working Paper, WP/14/78.Google Scholar
  17. R. Bannerjee, (2014), SME’s, Financial Constraints and Growth, BIS Working Paper Nr. 475.Google Scholar
  18. 24.
    C. Bonner, (2014), Preferential Regulatory Treatment and Bank’s Demand for Government Bonds, DNB Working Papers, Nr. 433.Google Scholar
  19. 27.
    R. Mohan and M. Kapur, (2014), Monetary Policy Coordination and the Role of Central Banks, IMF Working Paper, WP/14/70.Google Scholar
  20. 28.
    F. Lambert and K. Ueda, (2014), The Effects of Unconventional Monetary Policy on Bank Soundness, IMF Working Paper WP/14/152. Through the mechanism of globalization, this phenomenon has resulted not only in FIs being impacted by those policies, but also the clients they serve, including in emerging economies, where the economic infrastructure overall is more susceptible to shocks.Google Scholar
  21. M. Chui, I. Fender, and V. Sushko, (2014), Risks Related to EME Corporate Balance Sheets: The Role of Leverage and Currency Mismatch, BIS Quarterly Review (September), pp. 35–47.Google Scholar
  22. 29.
    C. Fullenkamp and C. Rochon, (2014), Reconsidering Bank Capital Regulation: A New Combination of Rules, Regulators and Market Discipline, IMF Working Paper, Nr. WP/14/169.Google Scholar
  23. 31.
    H. Tomura, (2014), Asset Illiquidity and Dynamic Bank Capital Requirements, International Journal of Central Banking, Vol. 10, Issue 3, pp. 291–317.Google Scholar
  24. 32.
    European Commission, (2010), Financial Sector Taxation, EC Taxation Papers Series, Working Paper Nr. 25.Google Scholar
  25. 33.
    V. Mendoza, P. Carville, and B. Larking, (2011), Bank Taxes: Variations on a Theme, Derivatives and Financial Instruments, Vol. 13, Issue 4, pp. 222–230.Google Scholar
  26. 39.
    P. Kavelaars, (2012), Netherlands Bank Tax Introduced, European Taxation (August), paragraph 3.3., pp. 437–442.Google Scholar
  27. J. Van der Geld, (2013), Bankenbelasting: de foute oplossing voor een echtprobleem, Rijkers Bundel, Prisma Print, Tilburg University, pp. 115–120.Google Scholar
  28. 40.
    P. Kavelaars, (2012), Netherlands Bank Tax Introduced, European Taxation (August), paragraph 3.3., p. 441.Google Scholar
  29. 53.
    D. Hirschleifer and S. H. Teoh, (2009), Systemic Risk, Coordination Failures and Preparedness Externalities, Journal of Financial Economic Policy, Vol. 1, Issue 2, pp. 128–142.CrossRefGoogle Scholar
  30. 54.
    V. Acharya and P. Volpin, (2007), Corporate Governance Externalities, London Business School and Centre for Economic Policy Research (CEPR) Working Paper.Google Scholar
  31. 55.
    V. V. Acharya, H. Le, and H. S. Shin, (2013), Bank Capital and Dividend Externalities, Princeton/NYU Working Paper Series.CrossRefGoogle Scholar
  32. F. G. Kaufman and K. E. Scott, (2003), What is Systemic Risk and Do Bank Regulators Retard or Contribute to it, The Independent Review, Vol. VII, Issue 3, pp. 371–391.Google Scholar
  33. 60.
    S. Titman, (2013), Financial Markets and Investment Externalities, The Journal of Finance, Vol. 68, Issue 4, pp. 1307–1329.CrossRefGoogle Scholar
  34. 63.
    A. Korinek, (2011), Systemic Risk Taking: Amplification Effects, Externalities and Regulatory Responses, ECB Working Paper Series, Nr. 1345. He asserts: ‘Even though they (individual market participants (ed.)) may have access to a complete market to insure against systemic risk, they insure to a socially inefficient extent because when they trade off the costs and benefits of insurance, they do not internalize the social benefits of insurance in the form of mitigating the economy-wide fire sales. By contrast, a policymaker has the capacity to internalize this externality and make everybody better off by inducing financial market participants to reduce their systemic risk-taking. This in turn will lead to lower fire sales, smaller price declines and greater macroeconomic stability’ (p. 5).Google Scholar
  35. 65.
    D. Masciandaro, and F. Passarelli, (2013), Financial Systemic Risk: Taxation or Regulation, Journal of Banking and Finance, Vol. 37, Issue 2, pp. 587–596.CrossRefGoogle Scholar
  36. M. Keen, (2011), Rethinking the Taxation of the Financial Sector, CESifo Economic Studies, Vol. 57, Issue 1, pp. 1–24.CrossRefGoogle Scholar
  37. 75.
    S. Titman, (2013), Financial markets and Investment Externalities, The Journal of Finance, Vol. 68, Issue 4, pp. 1307–1329.CrossRefGoogle Scholar
  38. 76.
    G. S. Eskeland, (1994), A Presumptive Pigovian Tax Complementing Regulation to Mimic an Emission Fee, World Bank Economic Review, Vol. 8, Issue 3, pp. 373–394.CrossRefGoogle Scholar
  39. 77.
    J. E. Stiglitz, (1989), Using Tax Policy to Curb Speculative Short-term Trading, Journal of Financial Services Research, Vol. 3, pp. 101–115.CrossRefGoogle Scholar
  40. 78.
    A. R. Admati, P. M. DeMarzo, M. F. Hellwig, and P. Pfleiderer, (2010), Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive, Stanford Graduate School of Business Research Paper Nr. 2065.Google Scholar
  41. 79.
    V. Acharya, T. Phillippon, M. Richardson, and N. Roubini, (2009), Financial Markets, Institutions and Instruments, Vol. 18, Issue 2, pp. 89–137.CrossRefGoogle Scholar
  42. 80.
    K. R. French et al. (2010), The Squam Lake Report: Fixing the Financial System, Princeton University Press, Princeton.Google Scholar
  43. 81.
    D. Masciandaro and F. Passarelli, (2013), Financial Systemic Risk: Taxation or Regulation, Journal of Banking and Finance, Vol. 37, Issue, 2, pp. 586–596.CrossRefGoogle Scholar
  44. L. Kaplow and S. Shavell, (2002), On the Superiority of Corrective Taxes to Quantity Regulation, American Law and Economics Review, Vol. 4, Issue 1, pp. 1–17.CrossRefGoogle Scholar
  45. S. Claessens et al. G. Dell’ Arriccia, D. Agiz, and L. Laeven, (2010), Lessons and Policy Implications from the Global Financial Crisis, IMF Working Paper Series, WP/10/44.Google Scholar
  46. R. A. de Mooij and M. P. Devereux, (2011), An Applied Analysis of ACE and CBIT Reforms in the EU, International Tax and Public Finance, Springer, Vol. 18, Issue 1, pp. 93–120.Google Scholar
  47. M. P. Devereux, (2012), Issues in the Design of Taxes on Corporate Profit, National Tax Journal, National Tax Association, Vol. 65, Issue 3, pp. 709–730.Google Scholar
  48. R. A. de Mooij, (2011), Tax Biases to Debt Finance: Assessing the Problem, Finding Solutions, IMF Staff Discussion Note, SDN11/11 and (2012) in Fiscal Studies, Vol. 33, Issue 4, pp. 489–512.CrossRefGoogle Scholar
  49. R. A. de Mooij, M. Keen, and M. Orihara, (2013), Taxation, Bank Leverage and Financial Crises, IMF Working Paper Series, WP/13/48.Google Scholar
  50. J. Vella, C. Fuest, and T. Schmidt-Eisenlohr, (2011), The EU Commission’s Proposal for a Financial Transaction Tax, British Tax Review, Vol. 6, pp. 607–621.Google Scholar
  51. J. English, J. Vella, and A. Yevgenyeva, (2013), The Financial Tax Proposal Under the Enhanced Cooperation Procedure: Legal and Practical Considerations, British Tax Review, Vol. 2, pp. 223–259.Google Scholar
  52. 83.
    M. P. Devereux, N. Johannesen, and J. Vella, (2013), Can Taxes Tame the Banks? Evidence from European Bank Levies, Working Papers Nr. 1325, Oxford University Centre for Business Taxation.Google Scholar
  53. 85.
    B. Coulter, C. Mayor, and J. Vickers, (2012), Taxation and Regulation of Banks to Manage Systemic Risk, Oxford University Presentation.Google Scholar
  54. 86.
    G. Cannas et al., (2014), Financial Activities Taxes, Bank Levies and Systemic Risk, EC Taxation Papers Series, Working Paper Nr. 43, who review the different levies introduced.Google Scholar
  55. 89.
    T. Hemmelgarn and G. Nicodème, (2010), The 2008 Financial Crisis and Taxation Policy, Working Paper Nr. 20–2010. European Commission, Luxembourg.Google Scholar
  56. J. Slemrod, (2009), Lessons for Tax Policy in the Great Recession, National Tax Journal, Vol. 62, Issue 3, pp. 387–397.CrossRefGoogle Scholar
  57. 90.
    D. N. Shaviro, (2009), The 2008–09 Financial Crisis: Implications for Income Tax Reform, New York University Law and Economics Working Paper Nr. 09–35, New York University, New York.Google Scholar
  58. 91.
    F. Longstaff and I. Strabulaev, (2014), Corporate Taxes and Capital Structure: A Long-Term Historical Perspective, NBER Working Paper, Nr. 20372.Google Scholar
  59. 94.
    D. A. Schackelford, D. N. Shaviro, and J. Slemrod, (2010), Taxation and the Financial Sector, National Tax Journal, Vol. 63, Issue 4, Part 1, pp. 781–806. They refer to the fact that declining real estate prices would not have created such widespread mortgage default risk had not l oan-to-value ratios been so high (p. 784).CrossRefGoogle Scholar
  60. 95.
    S. Fatica, T. Hemmelgarn, and G. Nicodème, (2012), The Debt-Equity Tax Bias: Consequences and Solutions, EC Taxation Papers Series, Working Paper Nr. 33, who conclude that tax deductibility of interest payments in most corporate income tax systems coupled with no such measure for equity financing creates economic distortions and exacerbates leverage. Leverage increases with the Corporate Income Tax (CIT) rate. The reason is that the statutory CIT rate determines the value of the debt capital structure of banks.Google Scholar
  61. 96.
    E. D. Kleinbard, (2003), Competitive Convergence in the Financial Services Market. Taxes, Vol. 81, Issue 3, pp. 225–260.Google Scholar
  62. S. Langedijk et al., (2014), Debt Bias in Corporate Taxation and the Costs of the Banking Crisis in the EU, EC Taxation Paper Series, Nr. 50 who evidence that eliminating the tax bias could lead to a reduction of public finance losses of around 60–90% (given a certain level/bandwidth of bank leverage elasticity) caused by the 2008 financial meltdown. The abolition of the preferential treatment is therefore argued as a tool to complement regulatory reform.Google Scholar
  63. 98.
    D. A. Schackelford, D. N. Shaviro, and J. Slemrod, (2010), Taxation and the Financial Sector, National Tax Journal, Vol. 63, Issue 4, Part 1, p. 785.Google Scholar
  64. 100.
    E. D. Domar and R. A. Musgrave, (1944), Proportional Income Taxation and Risk-Taking, Quarterly Journal of Economics, Vol. 58, Issue 3, pp. 388–422.CrossRefGoogle Scholar
  65. 102.
    V. V. Acharya and M. Richardson, (2009), Causes of the Financial Crisis, Critical Review, Vol. 21, Issue 2–3, pp. 195–210.CrossRefGoogle Scholar
  66. 104.
    D. A. Schackelford, D. N. Shaviro, and J. Slemrod, (2010), Taxation and the Financial Sector, National Tax Journal, Vol. 63, Issue 4, Part 1, p. 792.Google Scholar
  67. 105.
    T. Adrian and M. K. Brunnermeier, (2008), Covar, Staff Report Nr. 348, Federal Reserve Bank of New York, New York.Google Scholar
  68. 106.
    D. A. Schackelford, D. N. Shaviro, and J. Slemrod, (2010), Taxation and the Financial Sector, National Tax Journal, Vol. 63, Issue 4, Part 1, p. 793.Google Scholar
  69. 108.
    D. J. Elliott, (2010), A Primer on Bank Capital, The Brookings Institution, Washington, DC.Google Scholar
  70. 111.
    T. Matheson, (2010), Taxing Financial Transactions: Issues and Evidence, Working Paper WP/11/54, International Monetary Fund, Washington, DC.Google Scholar
  71. 112.
    T. Hemmelgarn and G. Nicodème, (2010), The 2008 Financial Crisis and Taxation Policy, Working Paper Nr. 20–2010, European Commission, Luxembourg.Google Scholar
  72. 113.
    P. Honohan and S. Yoder, (2010), Financial Transactions Tax: Panacea, Threat, or Damp Squib?, Policy Research Working Paper Series Nr. 5230. Development Research Group, The World Bank, Washington, DC.Google Scholar
  73. 114.
    W. Wagner, (2010), In the Quest of Systemic Externalities: A Review of the Literature, CESifo Economic Studies, Vol. 56, pp. 96–111.CrossRefGoogle Scholar
  74. 115.
    M. Bijlsma, M. Lever, J. Anthony, and G. Zwart, (2011), An Evaluation of the Financial Transaction Tax, CPB Background Paper, p. 6.Google Scholar
  75. 116.
    J. Scheinkman and W. Xiong, (2003), Overconfidence and Speculative Bubbles, Journal of Political Economy, Vol. 111, pp. 1183–1219.CrossRefGoogle Scholar
  76. 117.
    D. P. Porter and V. L. Smith, (2003), Stock Market Bubbles in the Laboratory, The Journal of Behavioral Finance, Vol. 4, Issue 1, pp. 7–20.Google Scholar
  77. 119.
    M. Bijlsma, M. Lever, J. Anthony, and G. Zwart, (2011), An Evaluation of the Financial Transaction Tax, CPB Background Paper, illustrate: ‘when the acquisition concerns information that will anyway be publicly revealed soon, but speculators can earn a profit by getting their hands on the information early … But even when such information acquisition is in itself socially beneficial (e.g., long-term fundamental information on the security), duplication of collection efforts need not be efficient. A tax on transactions can then efficiently reduce the incentives to invest in those efforts’ (pp. 7–8).Google Scholar
  78. 120.
    L. H. Summers and V. P. Summers, (1989), When Financial Markets Work Too Well: A Cautious Case for a Securities Transactions Tax, Journal of Financial Services, Vol. 3, pp. 261–286.CrossRefGoogle Scholar
  79. J. E. Stiglitz, (1989), Using Tax Policy to Curb Speculative Short-Term Trading, Journal of Financial Services, Vol. 3, Issue 2 & 3, pp. 101–113.CrossRefGoogle Scholar
  80. 123.
    D. Fudenberg and J. Tirole, (1991), Game Theory, MIT Press, Cambridge, section 14.3.3.Google Scholar
  81. 125.
    A. Subrahmanyam, (1998), Transaction Taxes and Financial Market Equilibrium, Journal of Business, Vol. 71, Issue 1, pp. 81–117.CrossRefGoogle Scholar
  82. 129.
    D. A. Schackelford, D. N. Shaviro, and J. Slemrod, (2010), Taxation and the Financial Sector, National Tax Journal, Vol. 63, Issue 4, Part 1, p. 798.Google Scholar
  83. 132.
    E. D. Kleinbard and T. Edgar, (2010), The Financial Sector and the Crisis: Was Tax the Problem? Is It the Solution? Slides presented at a workshop on ‘Rethinking the Taxation of the Financial Sector in Light of the Recent Crisis,’ February 5.Google Scholar
  84. 136.
    International Monetary Fund, (2010), A Fair and Substantial Contribution by the Financial Sector, Interim Report for the G-20, International Monetary Fund, Washington, DC, p. 26.Google Scholar
  85. 137.
    D. Schoenmaker and S. Oosterloo, (2005), Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities, International Finance, Vol. 8, Issue 1, pp. 1–27.CrossRefGoogle Scholar
  86. 138.
    A. R. Admati, (2000), Forcing Firms to Talk: Financial Disclosure Regulation and Externalities, Review of Financial Studies, Vol. 13, Issue 3, pp. 479–519.CrossRefGoogle Scholar
  87. 140.
    P. Hartmann, (2009), Systemic Risk, ECB Financial Stability Review, December, pp. 134–142.Google Scholar
  88. 141.
    E. Cerutti, S. Claessens, and P. McGuire, (2012), Systemic Risk in Global Banking: What Can Available Data Tell Us and What More Data are Needed, BIS Working Papers, Nr. 376.CrossRefGoogle Scholar
  89. 142.
    F. Fecht, H. P. Grüner, and P. Hartmann, (2012), Financial Integration, Specialization and Systemic Risk, ECB Working Paper Series, Nr. 1425.Google Scholar
  90. 143.
    F. Allen and D. Gale, (2000), Financial Contagion, Journal of Political Economy, Vol. 108, Issue 1, pp. 1–33.CrossRefGoogle Scholar
  91. 144.
    H. Minsky described how in good times consumption and investment increase generates income, which fuels the financing of more consumption and investment, but also the neglect of increasing risks. Even small events can then lead to a re-pricing of risk and an endogenous unraveling of the credit boom, which then adversely affects many intermediaries and markets at the same time; see H. Minsky, (1977), A Theory of Systemic Fragility, in E. Altman and A. Sametz (eds.), Financial Crises: Institutions and Markets in a Fragile Environment, Wiley & Sons, Hoboken, pp. 138–152.Google Scholar
  92. C. Kindleberger, (1978), Manias, Crashes and Panics: A History of Financial Crises, Macmillan, Basingstoke.CrossRefGoogle Scholar
  93. 145.
    G. Gorton, (1988), Banking Panics and Business Cycles, Oxford Economic Papers.Google Scholar
  94. P. Hartmann, (2009), Systemic Risk, ECB Financial Stability Review, p. 135.Google Scholar
  95. 148.
    J. Trichet, (2009), Systemic Risk, Clare Distinguished Lecture in Economics and Public Policy, University of Cambridge, December 10.Google Scholar
  96. 151.
    O. de Bandt and P. Hartmann, (2010), What is Systemic Risk Today?, Working Paper, p. 5.Google Scholar
  97. 153.
    P. Hartmann, (2009), Systemic Risk, ECB Financial Stability Review, p. 135.Google Scholar
  98. 154.
    C.-P. Georg, (2014), Contagious Herding and Endogenous Network Formation in Financial Networks, ECB Working Paper, Nr. 1700.Google Scholar
  99. 155.
    K. Anand, B. Craig, and G. von Peter, (2014), Filling in the Blanks: Network Structure and Interbank Contagion, BIS Working Paper, Nr. 455.Google Scholar
  100. 156.
    K. Kim and S. Mitra, (2014), Real and Financial Vulnerabilities from Cross-Border Banking Linkages, IMF Working Paper, Nr. WP/14/136.Google Scholar
  101. 157.
    BIS, (2014), The G-SIB Assessment Methodology-Score Calculation, (November 2014).Google Scholar
  102. 160.
    FSB, (2014), Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions, Consultation Document.Google Scholar
  103. 161.
    S. M. Markose, (2013), Systemic Risk Analytics: A Data-Driven Multi-Agent Financial Network Approach, Journal of Banking Regulation, Vol. 14, Issue 3/4, pp. 285–305, Special Issue on Regulatory Data and Systemic Risk Analytics.CrossRefGoogle Scholar
  104. 162.
    S. M. Markose, (2012), Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and its Mitigation with Super-Spreader Tax, IMF Working Paper, WP/12/282. Based on 2009 FDIC and individually collected firm level data covering gross notional, gross positive (negative) fair value, and the netted derivatives assets and liabilities for 202 financial firms which includes 20 SIFIs, the bilateral flows are empirically calibrated to reflect data-based constraints. This produces a tiered network with a distinct highly clustered central core of 12 SIFIs that account for 78% of all bilateral exposures and a large number of financial intermediaries on the periphery. The topology of the network results in the ‘Too-Interconnected-To-Fail’ (TITF) phenomenon in that the failure of any member of the central tier will bring down other members with the contagion coming to an abrupt end with demise of the ‘super-spreaders’.Google Scholar
  105. 163.
    I. Arsov, E. Canetti, L. Kodres, and S. Mitra, (2013), ‘Near-Coincident’ Indicators of Systemic Stress, IMF Working Paper Series, WP/13/115.Google Scholar
  106. 164.
    S. Markose, S. Giansante, M. Gatkowski, and A. R. Shanghaghi, (2010), Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks, Original Essex University Working Paper Series, Nr. 683.Google Scholar
  107. S. Markose, S. Giansante, and A. Shaghaghi (2012), Too Interconnected To Fail Financial Network of U.S. CDS Market: Topological Fragility and Systemic Risk, Journal of Economic Behavior and Organization, Vol. 83, Issue 3, August 2012, pp. 627–646.CrossRefGoogle Scholar
  108. 165.
    S. Markose, B. Oluwasegun, and S. Giansante, (2012), Multi-Agent Financial Network (MAFN) Model of US Collateralized Debt Obligations (CDO): Regulatory Capital Arbitrage, Negative CDS Carry Trade and Systemic Risk Analysis, Chapter in Simulation in Computational Finance and Economics: Tools and Emerging Applications Alexandrova-Kabadjova B., S. Martinez-Jaramillo, A. L. Garcia-Almanza, and E. Tsang, (eds.), (2012), IGI Global, August 2012.Google Scholar
  109. 166.
    FSB, (2010), Reducing the Moral Hazard by Systemically Important Financial Institutions, FSB Recommendations and Time Lines.Google Scholar
  110. 167.
    S. Markose, (2012), Systemic Risk from Global Financial Derivatives: A Network Analysis of Contagion and Its Mitigation with Super-Spreader Tax, International Monetary Fund Working Paper Nr. 12/282.Google Scholar
  111. 169.
    A. Haldane, (2009), Why Banks Failed the Stress Test, In Speech given at the Marcus-Evans Conference on Stress Testing, Bank of England (February).Google Scholar
  112. 171.
    A. Haldane, (2009) Rethinking the Financial Network, Speech Delivered at the Financial Student Association, Amsterdam.Google Scholar
  113. J. D. Hamilton, (1989), A New Approach to the Economic Analysis of Non Stationary Time Series and Business Cycle, Econometrica, Vol. 57, Issue 2, pp. 357–384.CrossRefGoogle Scholar
  114. 173.
    Committee on Ways and Means, (2014), Tax Reform Act 2014, Chairman Dave Camp, Section-by-Section Summary, pp. 180–181.Google Scholar
  115. 174.
    The Greens, (2014), Implicit Subsidies in the EU Banking Sector, Intermediate Reporting (January).Google Scholar
  116. 175.
    S. Schich and S. Lindh, (2012), Implicit Guarantees for Bank Debt: Where Do We Stand?, OECD Journal, Financial Market Trends, Vol. 2012, Issue 1, pp. 1–22.CrossRefGoogle Scholar
  117. 177.
    H. Minski, (1982), The Financial-Instability Hypothesis: Capitalist Processes and the Behavior of the Economy, in Ch. P. Kindleberger and J -P. Laffargue (eds.), Financial Crises: Theory, History and Policy, Cambridge University Press, Cambridge, pp. 13–38.Google Scholar
  118. 183.
    V. V. Acharya, L. H. Pedersen, T. Philippon, and M. Richardson, (2009), Measuring Systemic Risk, Working Paper, New York University Stern School of Business.Google Scholar
  119. V. V. Acharya, L. H. Pedersen, T. Philippon, and M. Richardson (2009) Regulating Systemic Risk, Chapter 13 in Restoring Financial Stability: How to Repair a Failed System, V. V. Acharya and M. Richardson (eds.), New York University Stern School of Business, John Wiley and Sons, Hoboken.Google Scholar
  120. V. V. Acharya, (2009), A Theory of Systemic Risk and Design of Prudential Bank Regulation, Journal of Financial Stability Elsevier, Vol. 5, Issue 3, pp. 224–255.CrossRefGoogle Scholar
  121. 184.
    V. V. Acharya, C. Brownelees, R. Engle, F. Farazmand, and M. Richardson, (2010), Measuring Systemic Risk, Chapter four in Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, V. V. Acharya, T. Cooley, M. Richardson, and I. Walter (eds.), John Wiley & Sons, Hoboken, pp. 199–232. In a European context regarding this model see: V. V. Acharya and S. Steffen, (2012), Analyzing Systemic Risk in the Banking Sector, Working Paper.CrossRefGoogle Scholar
  122. B. Weder di Mauro, (2010), Taxing Systemic Risk: Proposal for a Systemic Risk Levy and a Systemic Risk Fund, University of Mainz Working Paper.Google Scholar
  123. 185.
    C. Brownlees and R. Engle, (2011), Volatility, Correlation and Tails for Systemic Risk Measurement, Working Paper Series, Department of Finance, NYU advanced the model. Idier et al., however, conclude that standard balancesheet metrics like the tier one solvency ratio are better able than the MES to predict equity losses conditionally to a true crisis (using the 2008 datatsets).Google Scholar
  124. J. Idier, G. Lamé, and J.-S. Méssonier, (2013), How Useful is the Marginal Expected Shortfall for the Measurement of Systemic Exposure, A Practical Assessment, ECB Working Paper Series, Nr. 1546.Google Scholar
  125. 188.
    J. P. Solorzano-Margain, S. Martinez-Jaramillo, and F. Lopez-Gallo, (2013), Financial Contagion: Extending the Exposures Network of the Mexican Financial System, Computational Management Science, Vol. 10, Issue 2–3, pp. 125–155.CrossRefGoogle Scholar
  126. R. Heijmans, R. Heuver, C. Levallois, and I. van Lelyveld, (2014), Dynamic Visualisation of Large Transaction Networks: The Daily Dutch Overnight Money Market, DNB Working Paper Series, Nr. 418.Google Scholar
  127. 190.
    S. Markose, (2013), Systemic Risk Analytics: A Data Driven Multi-Agent Financial Network (MAFN) Approach, Submitted Special Issue Journal of Banking Regulation: Future of Regulatory Data and Systemic Risk Analytics, Bank of England Workshop January 17–18, 2013.Google Scholar
  128. 191.
    Markose and S. Giansante, (2014), Pigou Tax of Systemically Important Financial Intermediaries (SIFIs) in Financial Networks: An Empirical Application of Systemic Risk Monitoring and Governance, Working Paper, p. 29.Google Scholar
  129. 192.
    A. Serguaiva, (2013), Systemic Risk Identification, Modelling, Analysis, and Monitoring: An Integrated Approach, University College London, Working Paper.Google Scholar
  130. 193.
    M. Bijlsma, J. Klomp, and S. Duineveld (CPB), (2010), Systemic Risk in the Financial Sector: A Review and Synthesis, CBP Documents Nr. 210, pp. 53–70.Google Scholar
  131. T. Beck and W. Wagner, (2013), Supranational Regulation: How Much and From Whom?, CEPR Discussion Paper Nr. DP9546.Google Scholar
  132. 194.
    S. G. Cechetti, (2014), Systemic Risk and the Solvency-Liquidity Nexus of Banks, Brandeis International Business School Presentation, April 25.Google Scholar
  133. 195.
    C. W. Calomiris and S. H. Haber, (2013), Fragile By Design: The Political Origin of Banking Crisis and Scarce Credit, Princeton University Press, Princeton, NJ.Google Scholar
  134. 196.
    BIS, (2011), Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems, supra.Google Scholar
  135. 198.
    A. Lucas, B. Schwaab, and X. Zhang, (2013), Measuring Credit Risk in a Large Banking System: Econometric Modeling and Empirics, Presentation Cleveland FED, May 30–31 also as paper: Tinbergen Institute Discussion Paper 13–063/IV/DSF56.Google Scholar
  136. 200.
    S. Krieger, (2011), Shadow Maturity Transformation and Systemic Risk, FED of New York Presentation, March 6.Google Scholar
  137. 201.
    W. B. English, S. J. Van den Heuvel, and E. Zakrajšek, (2014), Interest Rate Risk and Bank Equity Valuations, University of Pennsylvania (Wharton), Working Paper.Google Scholar
  138. 204.
    M. M. Andreasen, M. Ferman, and P. Zabczyk, (2012), The Business Cycle Implications of Bank’s Maturity Transformation, ECB Working Paper Series, Nr. 1489.Google Scholar
  139. 205.
    O. Entrop, C. Memmel, B. Ruprecht, and M. Wilkens, (2012), Determinants of Bank Interest Margins: Impact of Maturity Transformation, Deutsche Bundesbank Discussion Paper Nr. 17/2012.Google Scholar
  140. C. Memmel, (2010), Bank’s Exposure to Interest Rate Risk, Their Earnings from Term Transformation, and the Dynamics of the Term Structure, Deutsche Bundesbank, Banking and Financial Studies Series, Nr. 7/2010.Google Scholar
  141. 206.
    A. Penalver, (2013), Managing Maturity Transformation Under Aggregate Uncertainty, Work in Progress, Paris School of Economics Working Paper.Google Scholar
  142. 207.
    T. Paligorova and J. A. C. Santos, (2014), Rollover Risk and the Maturity Transformation Function of Banks, Bank of Canada Working Paper Series, Nr. 2014–8.Google Scholar
  143. 208.
    A. Segura and J. Suarez, (2012), Dynamic Maturity Transformation, CEMFI Working Paper Nr. 1105 and (2013), Recursive Maturity Transformation, CEMFI Working Paper.Google Scholar
  144. A. Segura et al., (2014), How Excessive is Bank’s Maturity Transformation, CEMFI Working Paper.Google Scholar
  145. 209.
    L. de Haan and J. W. van den End, (2012), Bank Liquidity, the Maturity Ladder, and Regulation, Presentation DNB.Google Scholar
  146. 210.
    N. Tasic’ and N. Valev, (2009), The Maturity Structure of Bank Credit: Determinants ad Effects on Economic Growth, Working Paper.Google Scholar
  147. M. Mink, (2011), Procyclical Bank Risk-Taking and the Lender of Last Resort, DNB Working Paper Series, Nr. 301.Google Scholar
  148. 213.
    B. Winters, (2012), Review of the Bank of England’s Framework for Providing Liquidity to the Banking Sector, Bank of England Reporting, pp. 79–83.Google Scholar
  149. 214.
    R. S. Rajan and G. Bird, (2001), Banks, Maturity Mismatches and Liquidity Crises: A Simple Model, CIES Working Paper, Nr. 0132.Google Scholar
  150. 216.
    For an exception to that: H. Scholz, S. K. H. Simon, and M. Wilkens, (2007), Maturity Transformation Strategies and Interest Rate Risk of Financial Institutions: Evidence from the German Market, Working Paper.Google Scholar
  151. 217.
    I. J. M. Arnold and S. E. van Ewijk, (2014), The Impact of Sovereign and Credit Risk on Interest Rate Convergence in the Euro Area, DNB Working Paper Series, Nr. 425.Google Scholar
  152. C. Roulet, (2011), Empirical Essays on Bank Liquidity Creation and Maturity Transformation Risk, Dissertation, Université de Limoge, Economics Department, in particular pp. 21–49.Google Scholar
  153. 219.
    A. D. Smith, (2009), How To Make a Run-Proof Bank, Achieving Maturity Transformation Without Fractional Reserves, Griffith University Working Paper.Google Scholar
  154. C. Rossi, (2012), Is Maturity Transformation the Devil’s Work or just Bedeviled, Presentation, Atlanta FED, April 12.Google Scholar
  155. 220.
    B. Ruprecht, O. Entrop, T. Kick, and M. Wilkens, (2013), Market Timing, Maturity Mismatch and Risk Management: Evidence from the Banking Industry, Working Paper.Google Scholar
  156. 221.
    G. de Niccolò, A. Gamba ad M. Lucchetta, (2012), Capital Regulation, Liquidity Requirements and Taxation in a Dynamic Model of Banking, Presentation, Cleveland FED, April 13.Google Scholar
  157. 223.
    M. K. Brunnermeier and M. Oehmke, (2010), The Maturity Rat Race, Journal of Finance, American Finance Association, Vol. 68, Issue 2, pp. 483–521. Individual creditors can have an incentive to shorten the maturity of their own loans to the institution, allowing them to adjust their financing terms or pull out before other creditors can. This, in turn, causes all other lenders to shorten their maturity as well, leading to excessively short-term financing. This rat race occurs when interim information is mostly about the probability of default rather than the recovery in default, and is most pronounced during volatile periods and crises.Google Scholar
  158. 224.
    D. Luttrell, H. Rosenblum, and J. Thies, (2012), Understanding the Risks Inherent in Shadow Banking, a Primer and Practical Lessons Learned, Staff Paper, Dallas FED.Google Scholar
  159. 225.
    J. C.-F. Kuong, (2013), Self-Fulfilling Fire-Sales. Fragility of Collateralized ShortTerm Debt Markets, London School of Economic Working Paper. This paper shows that collateralized lending, although optimal to reduce borrower moral hazard, can lead to multiple equilibria and endogenous aggregate risk. This is because of a feedback loop between the risk-taking behavior of borrowers and the expected price of seized collateral in the secondary market. When the fire sale price of collateral is expected to be low, lenders demand more collateral and higher debt yields, making it more attractive for borrowers to engage in risk- taking ex ante (due to limited liability). The riskier pool of projects will lead to more liquidation ex post and hence more seized collateral to be sold off, justifying the expectation of low fire sale prices.Google Scholar
  160. 226.
    M. Singh and J. Aitkin, (2010), The (Sizeable) Role of Rehypothecation in the Shadow Banking System, IMF Working Paper, WP/10/172.Google Scholar
  161. 228.
    L. M. Sweet, (2010), Central Counterparties: Understanding Risks and Risk Transformation, Presentation, NY FED, October 21.Google Scholar
  162. 229.
    V. Maurin, (2014), Re-Using the Collateral of Others: A General Equilibrium Model of Rehypothecation, European University Institute Working Paper.Google Scholar
  163. M. Katagiri, R. Kato and T. Tsuruga, (2013), Prudential Capital Controls or Bailouts: The Impact of Different Collateral Constraints Assumptions, Kobe University Working Paper.Google Scholar
  164. 230.
    B. Jones, (2014), Identifying Speculative Bubbles: A Two-Pillar Surveillance Framework, IMF Working Paper Series, Nr. WP/14/208.Google Scholar
  165. 233.
    O. Issing, J. P. Krahnen, K. Regling, and W. White, (2012), White Paper, Recommendations by the Issing-Commission, Goethe University Frankfurt, p. 10.Google Scholar
  166. 234.
    M. King, (1985), A Pigouvian Rule for the Optimal Provision of Public Goods, NBER Working Paper, Nr. 1681.CrossRefGoogle Scholar
  167. A. Tsuneki, (2002), Shadow-Pricing Interpretation of the Pigovian Rule for the Optimal Provision of Public Goods: A Note, International Tax and Public Finance, Vol. 9, Issue 1, pp. 93–104.CrossRefGoogle Scholar
  168. 235.
    A. Levels and J. Capel, (2012), Is Collateral Becoming Scarce: Evidence from the Eurozone, DNB Occasional Studies, Vol. 10, Issue 1, pp. 1–74.Google Scholar
  169. 236.
    P. D. Karam et al., (2014), The Transmission of Liquidity Shocks: The Role of Internal Capital Markets and Bank Funding Strategies, IMF Working Paper, Nr. WP/14/207.Google Scholar
  170. 237.
    K. Nikolau, (2009), Liquidity (Risk) Concepts. Definitions and Interactions, ECB Working Paper Series, Nr. 1008.Google Scholar
  171. 238.
    BIS, (2014), Liquidity Coverage Ratio Disclosure Standards.Google Scholar
  172. BIS, (2014), Guidance for Supervisors on Market-Based Indicators of Liquidity.Google Scholar
  173. 239.
    J. W. van den End and M. Kruidhof, (2012), Modelling the Liquidity Ratio as Macroprudential Instrument, DNB Working Paper Series, Nr. 342.Google Scholar
  174. D. C. Hardy and Ph. Hochreiter, (2014), A Simple Macroprudential Liquidity Buffer, IMF Working Paper, Nr. WP/14/235.Google Scholar
  175. 240.
    BIS, (2013), Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools, bis.org, pp. 13–15.Google Scholar
  176. 241.
    BIS, (2008), Principles for Sound Liquidity Risk Management and Supervision, bis.org.Google Scholar
  177. 242.
    D. Diamond and P. Dybvig, (1983), Bank Runs, Deposit Insurance, and Liquidity, Journal of Political Economy, Vol. 91, pp. 401–419.CrossRefGoogle Scholar
  178. 243.
    M. Brunnermeier, (2009), Deciphering the Liquidity and Credit Crunch 20072008, Journal of Economic Perspectives, Vol. 23, pp. 77–100.CrossRefGoogle Scholar
  179. F. Allen, A. Babus, and E. Carletti, (2010), Financial Connections and Systemic Risk, NBER Working Paper, Vr. 16177.CrossRefGoogle Scholar
  180. G. Gorton, (2009), Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007, paper prepared for the Federal Reserve Bank of Atlanta’s 2009 Financial Markets Conference, May.Google Scholar
  181. 245.
    E. Perotti and J. Suarez, (2011), A Pigovian Approach to Liquidity Regulation, CEPR Discussion Paper, Nr. 8271, March.Google Scholar
  182. E. Perotti and J. Suarez, (2011), A Pigouvian Approach to Liquidity Regulation, IMF, Paper presented at the 12th Jacques Polak Annual Research Conference, November 10–11.Google Scholar
  183. 246.
    M. L. Weitzman, (1974), Prices vs. Quantities, Review of Economic Studies, Vol. 41, pp. 477–491.CrossRefGoogle Scholar
  184. W. Poole, (1970), Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model, Quarterly Journal of Economics, Vol. 84, pp. 197–216.CrossRefGoogle Scholar
  185. 247.
    E. Perotti and J. Suarez, (2002), Last Bank Standing: What Do I Gain if You Fail, CEMFI Working Paper.Google Scholar
  186. 248.
    E. Perotti and J. Suarez, (2011), A Pigovian Approach to Liquidity Regulation, CEPR Discussion Paper, Nr. 8271, March, p. 3.Google Scholar
  187. 249.
    G. Lopez-Espinosa, A. Moreno, A. Rubia, and L. Valderrama, (2012), Short-Term Wholesale Funding and Systemic Risk, A Global Covar Approach, IMF Working Paper, WP/12/46.Google Scholar
  188. G. Lopez-Espinosa, A. Moreno, A. Rubia, and L. Valderrama, (2012), Systemic Risk and Asymmetric Responses in the Financial Industry, IMF Working Paper Series, WP/12/152.Google Scholar
  189. 250.
    E. Perotti and J. Suarez, (2011), A Pigovian Approach to Liquidity Regulation, CEPR Discussion Paper, Nr. 8271, March, p. 4.Google Scholar
  190. 252.
    E. Perotti and J. Suarez, (2011), A Pigovian Approach to Liquidity Regulation, CEPR Discussion Paper, Nr. 8271, March, p. 1.Google Scholar
  191. M. C. Keeley, (1980), Deposit Insurance, Risk, and market Power in Banking, American Economic Review, Vol. 80, Issue 5, pp. 1183–1200.Google Scholar
  192. D. Gale, (2010), Capital Regulation and Risk-Taking, International Journal for Central Banking, Vol. 6, Issue 4, pp. 187–204.Google Scholar
  193. 253.
    T. Hellmann, K. Murdock, and J. Stiglitz, (2000), Liberalisation, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?, American Economic Review, Vol. 90, pp. 147–165.CrossRefGoogle Scholar
  194. 254.
    E. Perotti and J. Suarez, (2011), A Pigovian Approach to Liquidity Regulation, CEPR Discussion Paper, Nr. 8271, March.Google Scholar
  195. 256.
    G. Gianfelice, G. Marotta, and C. Torricelli, (2013), A Liquidity Risk Index as a Regulatory Tool for Systemically Important Banks, An Empirical Assessment Across Two Financial Crisis, Working Paper.Google Scholar
  196. 258.
    E. Perotti and J. Suarez, (2009), Liquidity Risk Charges as a Macro-Prudential Tool, A Pigovian Approach to Liquidity Regulation, CEPR Discussion Paper, Nr. 8271, March, pp. 3–5.Google Scholar
  197. 259.
    E. Perotti, (2010), The Governance of Macro-Prudential Taxation.Google Scholar
  198. B. Weder di Mauro, (2010), Taxing Systemic Risk, University of Mainz, Working Paper.Google Scholar
  199. 260.
    C. H. S. Bouwman, (2013), Liquidity: How banks create it and How It Should Be Regulated, Wharton Financial Institutions Center Working Paper.Google Scholar
  200. 261.
    D. Bonfim and M. Kim, (2012), Liquidity Risk in Banking: Is there Herding?, Working Paper.Google Scholar
  201. 262.
    A. N. Berger, C. H. S. Bouwman, T. K. Kick, and K. Schaeck, (2014), Bank Risk Taking and Liquidity Creation Following Regulatory Interventions and Capital Support, Wharton Financial Institutions Center Working Paper.Google Scholar
  202. 263.
    A. Ball, E. Denbee, M. J. Manning, and A. Wheterilt, (2011), Intraday Liquidity: Risk and Regulation, Bank of England Financial Stability Paper, Nr. 11.Google Scholar
  203. J. Cao and G. Illing, (2010), Regulation of Systemic Liquidity Risk, Munich University Discussion Paper Nr. 2010–2011.Google Scholar
  204. E. Farhi, M. Golosov, and A. Tsyvinski, (2009), A Theory of Liquidity and Regulation of Financial Intermediation, Review of Economic Studies, Vol. 76, pp. 973–992.CrossRefGoogle Scholar
  205. 265.
    D. Wu and H. Hong, (2013), Liquidity Risk, Market Valuation and Bank Failures, Working Paper.Google Scholar
  206. 266.
    F. Allen and E. Carletti, (2011), Systemic Risk and Macro-Prudential Regulation, University of Pennsylvania Working Paper. They identify six types of systemic risk, namely: (i) common exposure to asset price bubbles, particularly real estate bubbles; (ii) liquidity provision and mispricing of assets; (iii) multiple equilibria and panics; (iv) contagion; (v) sovereign default; and (vi) currency mismatches in the banking system.Google Scholar
  207. 267.
    J.-C. Rochet, (2004), Macroeconomic Shocks and Banking Supervision, Journal of Financial Stability, Vol. 1, Issue 1, pp. 93–110.CrossRefGoogle Scholar
  208. J.-C. Rochet, (2008), Liquidity Regulation and the Lender of Last Resort, Financial Stability Review, Vol. 11, pp. 45–52. He focuses on a number of market failures that can justify liquidity regulation. These include potential problems in payment systems, moral hazard problems at the individual bank level due to opaqueness of assets, and moral hazard at the aggregate level due to expectations of a generalized bailout if there are macro shocks. While the first two can be managed by ratios the latter requires more complex intervention.Google Scholar
  209. 268.
    V. Bruno and H. Shin, (2014), Cross-Border Banking and Global Liquidity, BIS Working Papers, Nr. 458.Google Scholar
  210. 271.
    F. Allen, (2014), How Should Bank Liquidity be Regulated?, Wharton School, University of Pennsylvania Working Paper, p. 3.Google Scholar
  211. 272.
    A. Walther, (2013), Jointly Optimal Regulation of Bank Capital and Liquidity, Cambridge University Working Paper.Google Scholar
  212. 273.
    D. Elliott, S. Salloy, and A Santos, (2012), Assessing the Cost of Financial Regulation, IMF Working Paper, Nr. 12/233, p. 43.Google Scholar
  213. 274.
    F. Allen, (2014), How Should Bank Liquidity be Regulated?, Wharton School, University of Pennsylvania Working Paper, p. 24.Google Scholar
  214. J. E. Stiglitz, (2014), Tapping the Brakes: Are Less Active Markets Safer and Better for the Economy?, Presented at the Federal Reserve Bank of Atlanta 2014 Financial Markets Conference, April 15.Google Scholar
  215. 275.
    European Banking Federation, (2014), Bank Leverage and its Economic Implications, Working Paper.Google Scholar
  216. 278.
    L. Nijs, (2014), Mezzanine Financing: Tools, Applications and Total Return, Wiley & Sons, Surrey.Google Scholar
  217. 279.
    I. Kienna and E. Jokivuolle, (2014), Does a Leverage Ratio Requirement Increase Bank Stability?, ECB Working Paper Series, Nr. 1676. The leverage ratio induces FIs with low-risk lending strategies to diversify into high-risk investments until the leverage ratio no longer constitutes a binding capital constraint on them.Google Scholar
  218. 280.
    J. Blouin et al., (2014), Thin Capitalization Rules and the Multinational Firm Capital Structure, EC Taxation Papers Series, Working Paper Nr. 42.Google Scholar
  219. 282.
    V. Fleischer, (2011), Tax Reform and the Tax Treatment of Debt and Equity, Joint Hearing, U.S. House of Representatives, Committee on Ways and Means, U.S. Senate Committee on Finance, pp. 2–4, who suggests a thin cap-like tax on debt to remove the tax incentive to increase leverage beyond the ratio that would arise in a world without taxes and avoid regulatory arbitrage.Google Scholar
  220. 284.
    J.-H. Hahm, H. S. Shin, and K. Shin, (2013), Non-Core bank Liabilities and Financial Vulnerability, Journal of Money, Credit and Banking, Vol. 45, Issue 1, pp. 3–36. Their position is in line with other literature to this effect, i.e. credit demand is larger than deposit growth (‘sticky’) in economic boom times. In this way, a higher incidence of non-core funding will be associated with above-trend growth in credit and compressed risk premiums.CrossRefGoogle Scholar
  221. 287.
    J.-H. Hahm, et al. (2012), Non-Core bank Liabilities and Financial Vulnerability, Journal of Money, NBER Working Paper Nr. 18428, p. 37.Google Scholar
  222. 291.
    V. Bruno and H. S. Shin, (2013), Assessing Macro-Prudential Policies: Case of Korea, Scandinavian Journal of Economics, Vol. 116, Issue 1, pp. 128–157.CrossRefGoogle Scholar
  223. 293.
    V. Bruno and H. S. Shin, (2011), Capital Flows, Cross-Border Banking and Global Liquidity, Princeton Working Paper.Google Scholar
  224. 294.
    V. Bruno and H. S. Shin, (2013), Assessing Macro-Prudential Policies: Case of Korea, Scandinavian Journal of Economics, Vol. 116, Issue 1, p. 2.Google Scholar
  225. C. Borio and P. Disyatat, P.-O. Gourinchas and M. Obstfeld, (2012), Stories of the Twentieth Century for the Twenty-First, American Economic Journal, Macroeconomics, Vol. 4, Issue 1, pp. 226–265.Google Scholar
  226. M. Obstfeld, (2012), Financial Flows, Financial Crises, and Global Imbalances, Journal of International Money and Finance, Vol. 31, pp. 469–480.CrossRefGoogle Scholar
  227. P. Lane and B. Pels, (2011), Current Account Balances in Europe, Working Paper, Trinity College Dublin.Google Scholar
  228. 296.
    V. Bruno and H. S. Shin, (2014), Globalization of Corporate Risk Taking, Princeton Working Paper.Google Scholar
  229. 297.
    J. Dow and J. Han, (2014), Contractual Incompleteness, Limited liability and Bubbles, Swedish House of Finance Research Paper, Nr. 14/03.Google Scholar
  230. 298.
    J. Cochrane, (2014), Towards a Run-Free Financial System, Chicago Booth School of Business Working Paper.Google Scholar
  231. 300.
    J. Cochrane, (2014), Towards a Run-Free Financial System, Chicago Booth School of Business Working Paper, p. 19.Google Scholar
  232. 303.
    J. Cochrane, (2014), Towards a Run-Free Financial System, Chicago Booth School of Business Working Paper, p. 20.Google Scholar
  233. 306.
    F. Zhang, (2010), High Frequency Trading, Stock Volatility and Price Discovery, Yale School of Management Working Paper.Google Scholar
  234. 307.
    B. Biais, T. Foucault, and S. Moinas, (2014), Equilibrium Fast Trading, Working Paper. They argue that high-speed market connections and information processing improve the ability to seize trading opportunities, raising gains from trade. They also enable fast traders to process information before slow traders, generating adverse selection and thus negative externalities. When investing in fast-trading technologies, institutions do not internalize these externalities. Besides banning them altogether, a Pigovian tax is suggested on the technology that enables high-speed trading.Google Scholar
  235. 308.
    J. Brumm et al., (2014), Margin Regulation and Volatility, ECB Working Paper Series, Nr. 1698.Google Scholar
  236. 309.
    H. Zhu, (2014), Do Dark Pools Harm Price Discovery, Review of Financial Studies, Vol. 27, Issue 3, pp. 747–789.CrossRefGoogle Scholar
  237. S. Patterson, (2013), Dark Pools: The Rise of the Machine Trader and the Rigging of the U.S. Stock Market, Crown Business, New York.Google Scholar
  238. M. Lewis, (2014), Flash Boys: A Wall Street Revolt, W.W. Norton & Company, New York.Google Scholar
  239. 310.
    Z. Pozsar and M. Singh, (2011), The Nonbank-Bank Nexus and the Shadow Banking System, IMF Working Paper, WP/11/289.Google Scholar
  240. 311.
    L. Nijs, (2016), The Global Handbook on Shadow Banking, Wiley & Sons, Surrey, forthcoming.Google Scholar
  241. 313.
    B. M. Lawsky, (2013), Shining a Light on Shadow Insurance: A Little-known Loophole That Puts Insurance Policyholders and Taxpayers at Greater Risk, New York State Department of Financial Services Report.Google Scholar
  242. R. S. J. Kooijen and M. Yogo, (2013), Shadow Insurance, NBER Working Paper, Nr. 19568.CrossRefGoogle Scholar
  243. 314.
    FSB, (2013), Strengthening Oversight and Regulation of Shadow Banking Policy Framework for Strengthening Oversight and Regulation of Shadow Banking Entities, pp. 6–11.Google Scholar
  244. 316.
    S. Claessens and L. Ratnovski, (2014), What is Shadow Banking?, IMF Working Paper, WP/14/25.Google Scholar
  245. 321.
    E. Perotti, (2013), The Roots of Shadow Banking, CEPR Paper, Nr. 69.Google Scholar
  246. 322.
    A. Jobst, (2008), What is Securitization, Finance and Development, September, pp. 48–49.Google Scholar
  247. 324.
    S. Claessens et al. (2012), Shadow Banking: Economics and Policy, IMF Staff Discussion Note, SDN 12/12, December, pp. 6–10.Google Scholar
  248. 325.
    Z. Poszar, (2008), The Rise and Fall of the Shadow Banking System, Regional Financial Review, July, pp. 13–25.Google Scholar
  249. Z. Poszar, T. Adrian, A. Ashcraft, and H. Boesky, (2013), Shadow Banking, Federal Reserve Bank of New York Economic Policy Review, December, pp. 1–16.Google Scholar
  250. 326.
    M. Knaup and W. Wagner, (2010), Measuring the Tail Risks of Banks, Working Paper.Google Scholar
  251. W. S. Frame, L. Wall, and L. J. White, (2012), The Devil is in the Tail: Residential Mortgage Finance and the U.S. Treasury, Working Paper Federal Reserve Bank of Atlanta 2012 Financial Markets Conference.Google Scholar
  252. M. R. C. van Oordt and C. Zhou, (2013), Systematic Tail Risk, DNB Working Paper, Nr. 400.Google Scholar
  253. 327.
    F. Battaglia and A. Gallo, (2012), The Impact of Securitization on Tail and Systemic Risk: Evidence From the Financial Crisis, Working Paper.Google Scholar
  254. 328.
    V. V. Acharya, T. F. Cooley, M. P. Richardson, and I. Walter, (2010), Regulating Wall Street: The Dodd Frank Act and the New Architecture of Global Finance, Wiley and Sons, Hoboken, Chapter 4.CrossRefGoogle Scholar
  255. 329.
    W. Jiangli and M. Pritsker, (2008), The Impact of Securitization on bank Holding Companies, FDIC/FRB Working Paper.Google Scholar
  256. W. Jiangli, M. Pritsker, and P. Raupach, (2007), Banking and Securitization, FDIC Working Paper.Google Scholar
  257. 331.
    J. Brunsden et al. (2014), Draghi’s ABS-Market Revival Set for Boost from Regulators, Bloomberg.com, September 16.Google Scholar
  258. C. Altomonte and P. Bussoli, (2014), Asset-Backed Securities: They Key to Unlocking Europe’s Credit markets, Bruegel Policy Contribution, Nr. 2014/7), hinting at a shadow agenda on behalf of the ECB.Google Scholar
  259. 332.
    T. Alloway, (2014), Sliced and Diced Debt Deals Make Roaring Comeback, Financial Times, June 4.Google Scholar
  260. 334.
    S. Fleming and C. Giles, (2014), Bank of England: Crashing the Party, Financial Times, June 24.Google Scholar
  261. 335.
    R. G. Rajan, (2005), Has Financial Development Made the World Riskier?, NBER Working paper, Nr. 11728.CrossRefGoogle Scholar
  262. J. P. Hunt, (2010), What Do Sub-Prime Securitization Contracts Actually Say About Loan Modification? Preliminary Results and Implications, Berkeley Center for law, Business and the Economy Working Paper. The current monetary policies also add to inequality as they favor investors in certain securities over others.Google Scholar
  263. 337.
    D. Solomon, (2012), The Rise of a Giant: Securitization and the Global Financial Crisis, American Business Law Journal, Vol. 49, Issue 4, pp. 859 ff.CrossRefGoogle Scholar
  264. 338.
    A. J. Levitin, (2013), The Paper Chase: Securitization, Foreclosure and the Uncertainty of the Mortgage Title, Duke Law Journal, Vol. 63, pp. 637–734.Google Scholar
  265. 339.
    M. Pagano and P. Volpin, (2012), Securitization, Transparency and Liquidity, London Business School Working Paper.Google Scholar
  266. 340.
    X. Dou and J. Wang, (2014), Asset Securitization and Bubbles: An Illustration of Subprime Mortgage Default Crisis, Advances in Economics and Business, Vol. 2, Issue 2, pp. 112–119.Google Scholar
  267. 341.
    A. G. Anderson, (2013), Ambiguity in Securitization Markets, Cornell University Johnson School Research Paper Series, Nr. 5–2013.Google Scholar
  268. 342.
    A. Schleifer and R. W. Vishny, (2010), Asset Fire Sales and Credit Easing, American Economic Review: Papers & Proceedings, Vol. 100, Issue 2, pp. 46–50.CrossRefGoogle Scholar
  269. 343.
    A. J. Levitin, A. D. Pavlov, and S. M. Wachter, (2009), Securitization: Cause or Remedy of the Financial Crisis?, Georgetown Law and Economics Research Paper, Nr. 1462895.Google Scholar
  270. 344.
    D. O. Beltran and C. P. Thomas, (2010), Could Asymmetric Information Alone Have Caused the Collapse of Private-Label Securitization?, International Finance Discussion Papers, FED US.Google Scholar
  271. 345.
    A. Fostel and J. Geneakoplos, (2011), Tranching, CDS and Asset Prices: Bubbles and Crashes, Princeton Working Paper.Google Scholar
  272. J. C. Stein, (2010), Securitization, Shadow Banking and Financial Fragility, Harvard University Working Paper.Google Scholar
  273. 346.
    A. J. Levitin and S. M. Wachter (2012), Explaining the Housing Bubble, Georgetown Law Journal, Vol. 100, Issue 4, pp. 1177–1258.Google Scholar
  274. M. N. Baily, R. E. Litan, and M. S. Johnson, (2008), The Origins of the Crisis, Fixing Finance Series, Nr. 3, Brookings Institute.Google Scholar
  275. 349.
    Y. Amihud, H. Mendelson, and L.H. Pedersen, (2005), Liquidity and Asset Prices, Foundations in Trends and Finance, Vol. 1, Issue 4, pp. 269–364.CrossRefGoogle Scholar
  276. 350.
    A. Bruggeman, (2007), Can Excess Signal an Asset Price Boom?, NBB Working Paper, Nr. 117.Google Scholar
  277. B. Bierut, (2013), Global Liquidity as an Early Indicator of Asset Price Booms, DNB Working Paper, Nr. 377.Google Scholar
  278. 351.
    P. Hörhdahl and F. Packer, (2006), Understanding Asset Prices An Overview, BIS Papers Nr. 34.Google Scholar
  279. 353.
    J. Hessel and J. Peeters, (2011), Housing Bubbles, the Leveraging Cycle and Role of Central Banking, DNB Occassional Studies, Vol. 9, Nr. 5.Google Scholar
  280. 354.
    J. Huang and J. Wang, (2010), Market Liquidity, Asset Prices and Welfare, Journal of Financial Economics, Vol. 95, Issue 1, pp. 107–127, previously released as MIT Working Paper (2008) and NBER Working Paper, Nr. 14058 (2008).CrossRefGoogle Scholar
  281. 355.
    L. Arrondel et al., (2014), Wealth and Income in the Euro Area. Heterogeneity in Households’ Behaviours, ECB Working Paper Series, Nr. 1709.Google Scholar
  282. 356.
    M. Wolf, (2014), Deeper Reform of Housing Finance is Vital for Stability, Financial Times, September 18.Google Scholar
  283. 357.
    E. J. Janger, (2002), Muddy rules for Securitization, Fordham Journal of Corporate and Financial Law, Vol. 7, Issue 2, pp. 300–320.Google Scholar
  284. 358.
    M. Segoviano, B. Jones, P. Lindner, and J. Blankenheim, (2013), Securitization: Lessons Learned and the Road Ahead, IMF Working Paper, WP/13/255.Google Scholar
  285. 359.
    Those standards have been awaited and were under development by the bank for International Settlements. A consultative document was released in 2013; see: BIS, (2013), Revisions to the Securitization Framework, December. Postclosing of the manuscript the final securitization framework has been released.Google Scholar
  286. BIS, (2014), Revisions to the Securitization Framework, Basel III Document, Basel Committee on banking Supervision, Basel. Major changes include the drivers behind risk exposures and the regulatory capital that banks should hold when engaging in various types of securitizations.Google Scholar
  287. 360.
    M. Marques-Ibanez, Y. Altunbas, and M. van Leuvensteijn, (2014), Competition and Bank Risk. The Effect of Securitization and Bank Capital, ECB Working Paper Series Nr. 1678.Google Scholar
  288. 361.
    FSB, (2012), Securities lending and Repos: Market Overview and Financial Stability Issues, Interim Report of the FSB Workstream on Securities Lending and Repos, pp. 1–5.Google Scholar
  289. 365.
    A. Shleifer and R. Vishny, (2011), Fire Sales in Finance and Macroeconomics, Journal of Economic Perspectives, Vol. 25 (Winter), pp. 30 ff.Google Scholar
  290. 366.
    J. C. Stein, (2013), The Fire-Sales Problem and Securities Financing Transactions, Speech October 3, At the Federal Reserve Bank of New York Workshop on Fire Sales as a Driver of Systemic Risk in Tri-party Repo and other Secured Funding Markets, New York.Google Scholar
  291. 367.
    G. Antinolfi, F. Carapella, C. Kahn, A. Martin, D. Mills, and E. Nosal, (2013), Repos, Fire Sales and Bankruptcy Policy, Federal Reserve Bank of Chicago Working Paper Nr. 2012–15.Google Scholar
  292. 369.
    B. Begalle, A. Martin, J. McAndrews, and S. McLaughlin, (2013), The Risk of Fire-Sales in the Tri-Party Repo Market, Federal Reserve Bank of New York Staff Reports, Nr. 616.Google Scholar
  293. 370.
    G. Gorton and A. Metrick, (2012), Securitized Banking and the Run on Repo, Journal of Financial Economics, Vol. 104, Issue 3, pp. 425–451.CrossRefGoogle Scholar
  294. A. Krishnamurthy, S. Nagel, and D. Orlov, (2012), Sizing Up Repo, NBER Working Paper, Nr. 17768.CrossRefGoogle Scholar
  295. A. Martin, D. Skeie, and E.-L. von Thadden, (2010), Repo Runs, Federal Reserve Bank of New York Staff Report, Nr. 444.Google Scholar
  296. A. Martin, D. Skeie, and E.-L. von Thadden, (2012), The Fragility of Short-Term Funding Markets, Working Paper.Google Scholar
  297. C. Merrill, T. D. Nadauld, R. M. Stulz, and S. M. Sherlund, (2012), Why Did Financial Institutions Sell RMBS at Fire Sales Prices During the Financial Crisis? Manuscript, unpublished.Google Scholar
  298. 371.
    G. B. Gorton et al., (2014), The Flight from Maturity, NBER Working Paper, Nr. 20027.CrossRefGoogle Scholar
  299. 372.
    V. V. Acharya and S. Oncu, (2013), A Proposal for the Resolution of Systemically Important Assets and Liabilities: The Case of the Repo Market, International Journal of Central Banking, Vol. 9, Issue 1, pp. 291–350.Google Scholar
  300. 373.
    T. Adrian and H. S. Shin, (2010), Liquidity and Leverage, Journal of Financial Intermediation, Vol. 19, pp. 418–437.CrossRefGoogle Scholar
  301. 374.
    A. Shleifer and R. Vishny, (1992), Liquidation Values and Debt Capacity: A Market Equilibrium Approach, Journal of Finance, Vol. 47, Issue 4, pp. 1343–1366.CrossRefGoogle Scholar
  302. 375.
    R. Greenwood, A. Landier and D. Thesmar, (2012), Vulnerable Banks, NBER Working Paper, Nr. 18537.CrossRefGoogle Scholar
  303. 376.
    F. Duarte and T. M. Eisenbach, (2014), Fire-Sale Spillovers and Systemic Risk, Federal Reserve Bank of NY Working Paper, Nr. 645.Google Scholar
  304. 377.
    H. M. Ennis, (2011), Strategic Behavior in the Tri-Party Repo Market, Economic Quarterly, Vol. 97, Issue 4, pp. 389–413.Google Scholar
  305. 378.
    FSB, (2014), Strengthening Oversight and Regulation of Shadow Banking, Regulatory Framework for Haircuts on Centrally-Cleared Securities Financing Transactions, October 14.Google Scholar
  306. A. Monnet, (2011), Rehypothecation, Philadelphia FED Business Review, quarter 4, pp. 18–25.Google Scholar
  307. 381.
    M. Singh and J. Aitken, (2010), The (Sizable) Role of Rehypothecation in the Shadow Banking Sector, IMF Working Paper, WP/10/172.Google Scholar
  308. 382.
    Among the greatest benefits of rehypothecation is capital efficiency in funding intermediation. Because collateral is repledged, less capital is needed to fund new debt or yield-seeking activities. Rehypothecation reduces the cost of pledging collateral, leveraging a greater amount of funding on a relatively smaller capital base. However, there are significant risks when leverage and financial layering become too complex and opaque to discern whether a reasonable capital cushion exists to cover potential asset price declines (infra); see: D. Luttrel, H. Rosenblum, and J. Thies, (2012), Understanding the Risks Inherent in Shadow Banking. A Primer and Practical Lessons Learned, Dallas FED Staff papers, Nr. 18, pp. 35–40.Google Scholar
  309. 383.
    M. Brunnermeier and L. Pedersen, (2008), Market Liquidity and Funding Liquidity, Review of Financial Studies, Vol. 22, Issue 6, pp. 2201–2238.CrossRefGoogle Scholar
  310. 384.
    C. Johnson, (1997), Derivatives and Rehypothecation Failure. It’s 3:00 pm. Do You Know Where Your Collateral Is? Arizona Law Review, Vol. 30, pp. 949 ff.Google Scholar
  311. 385.
    BIS, (2013), Asset Encumbrance, Financial Reform and the Demand for Collateral Assets, Report submitted by a Working Group established by the Committee on the Global Financial System, CGFS Papers, Nr. 49.Google Scholar
  312. J. C. Lopez, R. Mendes, and H. Vickstedt, (2013), The Market for Collateral: The Potential Impact of Financial Regulation, Bank of Canada, Financial System Review (June), pp. 45–53.Google Scholar
  313. 386.
    The other part of regulation focuses on more transactions being cleared over a central clearing party (CCP); see: D. Duffie, M. Scheicher, and G. Vuillemey, (2014), Central Clearing and Collateral Demand, ECB Working Paper Series Nr. 1638.CrossRefGoogle Scholar
  314. 387.
    M. Singh, (2010), Undercollateralisation and Rehypothecation in the OTC Derivative Markets, Financial Stability Review (July), pp. 113–119.Google Scholar
  315. 388.
    V. Maurin, (2014), Re-Using the Collateral of Others: A General Equilibrium Model of Rehypothecation, European University Institute Working Paper.Google Scholar
  316. 389.
    S. L. Schwarcz, (2010), Distorting Legal Principles, The Journal of Corporate Law, Vol. 35, Issue 4, pp. 697–727. However, its distortion of nemo dat creates uncertainty (in the case of rehypothecation) when customer securities become subject to claims of an intermediary’s creditors, to whom the securities have been rehypothecated. If customer securities were to become subject to those claims, customers could lose their securities if the intermediary fails. Rehypothecation, although a long-standing practice (one may always grant a security interest in property to the extent of one’s rights therein), its operational execution has changed and became flawed. Lehman Brothers Inc. (for example), like many other prime-brokerage intermediaries, insisted that customers contractually consent to allow the intermediary to directly rehypothecate the customers’ securities as collateral for financing obtained by the intermediary. The practice is conceptually flawed, in that the intermediary does not own those securities but merely holds those securities on behalf of its customers, who at most give the intermediary a security interest in those securities. Lacking ownership of the customers’ securities, the intermediary should not be able, under the principle of nemo dat, to grant a security interest that enables its creditors to obtain ownership of those securities through foreclosure. Conceptually, therefore, Lehman and other prime-brokerage intermediaries ignored nemo dat when engaging in this form of rehypothecation (pp. 702–703).Google Scholar
  317. M. Singh and J. Aitkin, (2009), Deleveraging after Lehman — Evidence from Reduced Rehypothecation, IMF Working Paper, WP/09/42.Google Scholar
  318. 390.
    M. Singh, (2011), Velocity of Pledge Collateral: Analysis and Implications, IMF Working Paper, WP/11/256.Google Scholar
  319. 391.
    A. Copeland, D. Duffie, A. Martin, and S. McLaughlin, (2012), Key Mechanics of the U.S. Tri-Party Repo market, FRBNY, Working Paper.Google Scholar
  320. 393.
    J. Authors, (2014), Democratization of Finance, Financial Times, June 23.Google Scholar
  321. P. Jenkins, (2014), Into the Shadows: Taking Another Path, Financial Times, June 16.Google Scholar
  322. P. McCulley, (2014), Make Shadow Banks Safe and Private Money Sound, Financial Times, June 16.Google Scholar
  323. 395.
    D. Luttrel, H. Rosenblum, and J. Thies, (2012), Understanding the Risks Inherent in Shadow Banking: A Primer and Practical Lessons Learned, Dallas FED Staff papers, Nr. 18, p. 38.Google Scholar
  324. 396.
    Regarding the evaluation after the 1930 crisis see in detail: K. J. Mitchener and K. Wandschneider, (2014), Did Capital Controls Help Countries Recover from the Great Depression of the 1930s, NBER Working paper, Nr. 20220, June 26. Similar results have been yielded regarding the aftermath of the 2008 crisis.Google Scholar
  325. 398.
    O. Jeanne and A. Korinek, (2010), Managing Credit Booms and Busts: A Pigovian Tax Approach, NBER Working Paper Series, Nr. 16377.CrossRefGoogle Scholar
  326. 400.
    O. Jeanne and A. Korinek, (2010), Managing Credit Booms and Busts: A Pigovian Tax Approach, NBER Working Paper Series, Nr. 16377, p. 2.CrossRefGoogle Scholar
  327. 402.
    G. Lorenzoni, (2008), Inefficient Credit Booms, Review of Economic Studies, Vol. 75, Issue 3, pp. 809–833.CrossRefGoogle Scholar
  328. 404.
    IMF, (2009), What’s the Damage? Medium-Term Output Dynamics after Financial Crises, Chapter 4, World Economic Outlook, pp. 121–151.Google Scholar
  329. 405.
    O. Jeanne and A. Korinek, (2010), Managing Credit Booms and Busts: A Pigovian Tax Approach, NBER Working Paper Series, Nr. 16377, p. 34.CrossRefGoogle Scholar
  330. 406.
    E. Nier and T. Sadi Sedik, (2014), Gross Private Capital Flows to Emerging Markets: Can the Global Financial Cycle be Tamed, IMF Working Paper Nr. WP/14/196.Google Scholar
  331. 407.
    M. Saeed Qureshi et al., (2014), Regulating Capital Flows at Both Ends. Does it Work, IMF Working Paper Nr. WP/14/188. They focus on the coordination between source and recipient countries as a policy tool to manage cross-border capital flows and the spillover effects it might create.Google Scholar
  332. 408.
    O. Jeanne and A. Korinek, (2010), Excessive Volatility in Capital Flows: A Pigovian Taxation Approach, NBER Working Paper Series, Nr. 15927.CrossRefGoogle Scholar
  333. 410.
    A. Korinek, (2010), Regulating Capital Flows to Emerging markets.Google Scholar
  334. 411.
    O. Jeanne and A. Korinek, (2010), Excessive Volatility in Capital Flows: A Pigovian Taxation Approach, NBER Working Paper Series, Nr. 15927, p. 10.CrossRefGoogle Scholar
  335. 413.
    F. Gallego, L. Hernandez, and K. Schmidt-Hebbel, (2002), Capital Controls in Chile: Were They Effective?, in L. Hernandez and K. Schmidt-Hebbel (eds.), Banking, Financial Integration, and Crises, Central Bank of Chile, Santiago, pp. 361 ff.Google Scholar
  336. 415.
    O. Jeanne and A. Korinek, (2013), Macro-prudential Regulation versus Mopping Up after the Crash, NBER Working Paper Series, Nr. 18675.CrossRefGoogle Scholar
  337. 416.
    A. Korinek and J. Kreamer, (2013), The Redistributive Effects of Financial Deregulation, NBER Working Paper Series, Nr. 19572.CrossRefGoogle Scholar
  338. 417.
    A. Korinek and A. Simsek, (2014), Liquidity Trap and Excessive Leverage, NBER Working Paper Series, Nr. 19970.CrossRefGoogle Scholar
  339. 419.
    O. Jeanne and A. Korinek, (2014), Macro-Prudential Policy Beyond Banking Regulation, Banque de France, Financial Stability Review, Nr. 18, April 2014, pp. 163–171.Google Scholar
  340. 420.
    S. Claessens, (2014), An Overview of Macro-prudential Policy Tools, IMF Working Paper Series, Nr. WP/14/214.Google Scholar
  341. 424.
    T. I. Palley, (2008), Financialization: Why It Is and Why It Matters?, Levy Economics Institute Working Paper Nr. 525. Palley documents that its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector, (2) transfer income from the real sector to the financial sector, and (3) increase income inequality and contribute to wage stagnation. Additionally, there are reasons to believe that financialization may put the economy at risk of debt deflation and prolonged recession.Google Scholar
  342. 425.
    E. Engelen, M. Konings, and R. Fernandez, (2010), Geographies of Financialization in Disarray: The Dutch Case in Comparative Perspective, Economic Geography, Vol. 86, Issue 1, pp. 53–73.CrossRefGoogle Scholar
  343. 426.
    G. A. Epstein (ed.), (2005), Financialization and the World Economy, Edward Elgar, Cheltenham, p. 3.Google Scholar
  344. 427.
    I. Ertürk, J. Froud, S. Johal, A. Leaver, and K. Williams (eds.), (2008), Financialization at Work, Routledge, Abingdon.Google Scholar
  345. 431.
    C. M. Reinhart and K. Rogoff, (2011), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, Princeton, NJ.Google Scholar
  346. H. Schwartze and L. Seabrooke, (2008), Varieties of Residential Capitalism in the International Political Theory: Old Welfare States and the New Politics of Housing, Comparative European Politics, Vol. 6, pp. 237–261.CrossRefGoogle Scholar
  347. 432.
    D. MacKenzie, (2006), An Engine, Not a Camera: How Financial Models Shape Markets, MIT Press, Cambridge, MA.CrossRefGoogle Scholar
  348. 433.
    E. Engelen, R. Fernandez, and R. Hendrikse, (2014), How Finance Penetrates its Other: A Cautionary Tale on the Financialization of a Dutch University, Antipode, March, pp. 1–20. That is quite remarkable given the long-standing tradition of self-managed guild-oriented public funded universities in continental Europe.Google Scholar
  349. 434.
    I-H. Cheng and W. Xiong, (2013), The Financialization of Commodity Markets, NBER Working Paper Series, Nr. 19642.CrossRefGoogle Scholar
  350. 435.
    L. Nijs, (2014), Global Agricultural Markets: The Handbook of Land, Water and Soft Commodities, Chapter 16 on Speculation in soft commodity markets, Palgrave Macmillan, London, including a material literature review of the matter.Google Scholar
  351. 436.
    S. R. Isakson, (2013), The Financialization of Food: A Political Economy of the Transformation of Agro-Food Supply Chains, ICAS Review Paper Series Nr. 5.Google Scholar
  352. J. Clapp, (2012), The Financialization of Food: Who is Being Fed?, Waterloo University Working Paper.Google Scholar
  353. J. Clapp, (2013), Financialization, Distance and Global Food Politics, Conference Paper Nr. 5, Food Sovereignty: A Critical Dialogue, September 14–15.Google Scholar
  354. 437.
    M. C. Taylor, (2011), Financialization of Art, Capitalism and Society, Vol. 6, Issue 2, Article 3, updated in 2013. As well: N. Horowith, (2014), Art of the Deal: Contemporary Art in a Global Financial Market, Princeton University Press, Princeton, NJ, in particular pp. 143–187.CrossRefGoogle Scholar
  355. N. Horowith, (2014), Art of the Deal: Contemporary Art in a Global Financial Market, Princeton University Press, Princeton, NJ, in particular pp. 143–187.Google Scholar
  356. 438.
    M. Hudson, (2010), The Transition of Industrial Capitalism to a Financialized Bubble Economy, Levy Economics Institute, Working Paper, Nr. 627.Google Scholar
  357. G. A. Epstein, (2005), Financialization of the World Economy, Edward Elgar, Cheltenham.Google Scholar
  358. 439.
    A. Sheng, (2013), The End of Financialization, Institute for New Economic Thinking, blog article.Google Scholar
  359. 440.
    S. G. Cecchetti and E. Kharroubi, (2012), Reassessing the Impact of Finance on Growth, BIS Working Papers Series, Nr. 381.Google Scholar
  360. 442.
    L. Lohman, (2013), Financialization, Commodification and Carbon: The Contradictions of Neoliberal Climate Change, Working Paper.Google Scholar
  361. 443.
    T. I. Palley, (2013), Financialization: The Economics of Finance Capital Domination, Palgrave Macmillan, Basingstoke, pp. 31–43, passim.Google Scholar
  362. 444.
    D. M. Kotz, T. McDonough, and M. Reich (Eds), (1994), Social Structures of Accumulation: The Political Economy of Growth and Crisis, Cambridge University Press, Cambridge, pp. 45–47.CrossRefGoogle Scholar
  363. 445.
    D. M. Kotz, (2008), Neo Liberalism and Financialization, University of Massachusetts Amherst Working Paper.Google Scholar
  364. 447.
    G. Dumenil and D. Levy, (2005), Costs and Benefits of Neo Liberalism, in G. Epstein, (ed.), Financialization and the World Economy, Edward Elgar, Cheltenham and Northampton, p. 19.Google Scholar
  365. D. Kotz and T. McDonough, (2008), Global Neo Liberalism and the Contemporary Social Structure of Accumulation, in T. McDonough, M. Reich, and D. Kotz (eds.), Understanding Contemporary Capitalism: Social Structure of Accumulation Theory for the Twenty First Century, Cambridge University Press, Cambridge, pp. 73–83.Google Scholar
  366. D. Kotz, (2012), Social Structures of Accumulation, the Rate of Profit, and Economic Crisis, University of Amherst Working Paper.Google Scholar
  367. D. Kotz, (2014), The Rise and fall of Neoliberal Capitalism, Harvard University Press, Cambridge, MA, in particular Chapter 4.Google Scholar
  368. 449.
    E. Caverzasi, (2014), Minsky and the Sub-Prime Mortgage Crisis: The Financial Instability Hypothesis in the Era of Financialization, Levy Economics Institute, Working Paper Nr. 796.Google Scholar
  369. 450.
    K.-H. Lin and D. Tomaskovic-Devey, (2014), Financialization: Causes, Inequality Consequences, and Policy Implications, University of Amherst Working Paper.Google Scholar
  370. 451.
    J. Heylar and B. Burrough, (1989), Harper Collins, New York.Google Scholar
  371. 452.
    S. Berger, (2014), How Finance Gutted Manufacturing, Boston Review, April 1.Google Scholar
  372. 453.
    A. Demirgüç-Kunt, E. Feyen, and R. Levine, (2011), The Evolving Importance of Banks and Securities Markets, World Bank, Policy Research Working Paper, Nr. 5805.CrossRefGoogle Scholar
  373. 454.
    L. Gambacorta, J. Yang, and K. Tsatsaronis, (2014), Financial Structure and Growth, BIS Quarterly Review, March 2014, pp. 21–35.Google Scholar
  374. 455.
    S. Cecchetti and E. Kharroubi, (2012), Reassessing the Impact of Finance on Growth, BIS Working Papers, Nr. 381.Google Scholar
  375. 456.
    S. Law and N. Singh, (2014), Does Too Much Finance Harm Economic Growth?, Journal of Banking and Finance, Vol. 41, pp. 36–44.CrossRefGoogle Scholar
  376. 457.
    C. Saborowski, S. Sanya, H. Weisfeld, and J. Yepez, (2014), Effectiveness of Capital Outflow Restrictions, IMF Working Paper, WP/14/8.Google Scholar
  377. Juan Pablo Medina and Jorge Roldós, (2014), Monetary and Macroprudential Policies to Manage Capital Flows, IMF Working Paper, WP/14/30.Google Scholar
  378. 458.
    R. McCauley, P. McGuire, and G. von Peter, (2010), The Architecture of Global Banking: from International to Multinational, BIS Quarterly Review, March 2010, pp. 25–37.Google Scholar
  379. R. De Haas and I. van Lelyveld, (2010), Internal Capital Markets and Lending by Multinational Bank Subsidiaries, Journal of Financial Intermediation, Vol. 19, pp. 1–25.CrossRefGoogle Scholar
  380. 459.
    J. Blouin, H. Huizinga, L. Laeven, and G. Nicodème, (2014), Thin Capitalization Rules and Multinational Firm Capital Structure, IMF Working Paper, WP/14/12.Google Scholar
  381. 460.
    S. Claessens and L. Kodres, (2014), The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions, IMF Working Paper, WP/14/46.Google Scholar
  382. 461.
    T. Tressel and T. Verdier, (2014), Optimal Prudential Regulation of Banks and the Political Economy of Supervision, IMF Working Paper, WP/14/90.Google Scholar
  383. McKinsey, (2013), QE and Low Interest Rates: Distributional Effects and Risks, Working Paper.Google Scholar
  384. 462.
    R. Mohan and M. Kapur, (2014), Monetary Policy Coordination and the Role of Central banks, IMF Working Paper, WP/14/70.Google Scholar
  385. 463.
    C. Minoiu, C. Kang, V. S. Subrahmanian, and A. Berea, (2014), Does Financial Connectedness Predict Crisis, IMF Working Paper, WP/13/267.Google Scholar
  386. 464.
    L. Laeven, L. Ratnovski, and H. Tong, (2014), Bank Size and Systemic Risk, IMF Staff Discussion Note, SDN/14/04.Google Scholar
  387. 465.
    R. Babihuga and M. Spaltro, (2014), Bank Funding Costs for International Banks, IMF Working Paper, WP/14/71.Google Scholar
  388. 466.
    J. Vinals, C. Pazarbasioglu, J. Surti, A. Narain, M. Erbenova, and J. Chow, (2013), Creating a Safer Financial System: Will the Volcker, Vickers, and Liikanen Structural Measures Help?, IMF Staff Discussion Note, SDN/13/4.Google Scholar
  389. 467.
    N. Xingyuan Che and Y. Shinagawa, (2014), Financial Soundness Indicators and the Characteristics of Financial Cycles, IMF Working Paper, Nr. WP/14/14.Google Scholar
  390. 468.
    Ph. Aghion and E. Kharroubbi, (2013), Cyclical Macroeconomic Policy, Financial Regulation and Economic Growth, BIS Working Paper Nr. 434.Google Scholar
  391. 470.
    B. Öztürk and M. Mrkaic, (2014), SMEs’ Access to Finance in the Euro Area: What Helps or Hampers?, IMF Working Paper, Nr. WP/14/78.Google Scholar
  392. N. Klein, (2014), Small and Medium Size Enterprises, Credit Supply Shocks, and Economic Recovery in Europe, IMF Working Paper, Nr. WP/14/98.Google Scholar
  393. 471.
    S. Cevik and K. Teksoz, (2014), Deep Roots of Fiscal Behavior, IMF Working Paper, Nr. WP/14/45.Google Scholar
  394. 472.
    S. G. Cecchetti and E. Kharroubi, (2012), Re-assessing the Impact of Finance on Growth, BIS Working Paper, Nr. 381.Google Scholar
  395. S. G. Cecchetti and E. Kharroubi, (2013), Why Does Financial Sector Growth Crowd Out Real Economic Growth?, BIS Working Paper.Google Scholar
  396. S. H. Law and N. Singh, (2013), Does Too Much Finance Harm Economic Growth, Working Paper, they demonstrate similar findings. Cecchetti et al. draw two important conclusions: First, the growth of a country’s financial system is a drag on productivity growth. That is, higher growth in the financial sector reduces real growth. In other words, financial booms are not, in general, growth enhancing, probably because the financial sector competes with the rest of the economy for resources. Second, they examined the distributional nature of this effect and find that credit booms harm what we normally think of as the engines for growth: those that are more R&D-intensive. Their findings point to a pressing need to reassess the relationship of finance and real growth in modern economic systems.Google Scholar
  397. 473.
    S. Dées and J. Güntner, (2014), The International Dimensions of Confidentiality Shocks, ECB Working Paper Series, Nr. 1669.Google Scholar
  398. 474.
    T. Ahnert, (2014), Rollover Risk, Liquidity and Macro-Prudential Regulation, ECB Working Paper Series, Nr. 1667.Google Scholar
  399. V. V. Acharya and H. Naqvi, (2012), The Seeds of a Crisis: A Theory of Bank Liquidity and Risk-Taking over the Business Cycle, CEPR Discussion Papers Nr. 8851.Google Scholar
  400. 475.
    BIS, (2014), Review of the Pillar 3 Disclosure Requirements-Consultative Document, June 24.Google Scholar
  401. 476.
    (Capital) Income taxes become problematic the more the economies they cover become open economies, which is the case in terms of globalization as the elasticity of capital income taxes becomes larger as economies become open structured; see: E. Mendoza, L. Tesar and J. Zhang, (2014), Saving Europe: The Unpleasant Arithmetic of Fiscal Austerity in Integrated Economies, NBER Working Paper, Nr. 20200.Google Scholar
  402. 478.
    C. Piga, (2003), Pigouvian Taxation in Tourism, Environmental and Resource Economics, Vol. 26, pp. 343–359.CrossRefGoogle Scholar
  403. 479.
    C. Todd, S. Kallbekken, and S. Kroll, (2011), The Impact of Trial Runs on the Acceptability of Pigouvian Taxes: Experimental Evidence, Cicero Working Paper, Nr. 2011/01.Google Scholar

Copyright information

© Luc Nijs 2016

Authors and Affiliations

  • Luc Nijs

There are no affiliations available

Personalised recommendations