Advertisement

Chasing the Tail of Financial Stability? Solutions to the Last Crisis Are the Seeds for the Next One

  • Marcel Kasumovich
Part of the Palgrave Macmillan Studies in Banking and Financial Institutions book series (SBFI)

Abstract

There is a growing tension in policy objectives. While unemployment rates are returning to long-term norms, inflation is undershooting policy objectives most notably in Europe and Japan. This has encouraged global monetary policy to err on the side of an accommodative stance, on the grounds of being the lowest-risk outcome. The cost of a policy mistake from preemptive tightening — deflation — is much greater than a potential overshooting of inflation from too long a period of low interest rates. High debt ratios and lower nominal income trends risk a lasting negative feedback loop through lower expected returns, larger pension gaps, higher saving rates, lower capital demand, and tighter credit conditions.

Keywords

Central Bank Federal Reserve Systemic Risk Financial Stability Credit Default Swap 
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.

References

  1. Bank of China (2014). “2014 Interim Results Announcement.” Beijing, China, 20 August.Google Scholar
  2. Bank of International Settlements (2013). “GHOS endorses revised liquidity standard for banks.” Basel, Switzerland: BIS, 6 January.Google Scholar
  3. Bank of International Settlements (2014). “Asset Managers in Emerging Market Economies.” Basel, Switzerland: BIS, 14 September.Google Scholar
  4. Bernanke, B. (2012). “Monetary Policy since the Onset of the Crisis.” Federal Reserve Bank of Kansas City Economic Symposium, Wyoming. August.Google Scholar
  5. Blackrock (2013). “Exchange Traded Products: Overview, Benefits and Myths.” Viewpoint Series. June.Google Scholar
  6. Blackrock (2014). “The Liquidity Challenge: Exploring and Exploiting (Il) liquidity.” Blackrock Investment Institute. June.Google Scholar
  7. Craig, S., Hua, C., Ng, P., and Yuen, R. (2013). Development of the Renminbi market in Hong Kong SAR: Assessing Onshore-Offshore Market Integration, International Monetary Fund Working Paper 13/268. December.Google Scholar
  8. Feroli, M., Kashyap, A., Schoenholtz, K., and Shin, H.S. (2014). Market Tantrums and Monetary Policy, The Initiative on Global Markets Working Paper No. 101. February.Google Scholar
  9. Financial Crisis Inquiry Commission (2011). “Financial Crisis Inquiry Report,” US Government Printing Office.Google Scholar
  10. Gordon, G. B. (2012). Misunderstanding Financial Crises: Why We Don’t See Them Coming. Oxford: Oxford University Press.Google Scholar
  11. International Monetary Fund (2014). “Global Financial Stability Review.” Washington: International Monetary Fund. April.Google Scholar
  12. Oliver, Wyman (2012). OTC Derivatives Clearing: Perspectives on the Regulatory Landscape and Considerations for Policymakers. Marsh & McLennan Companies. May.Google Scholar
  13. Poterba, J. and Shoven, J. (2002). Exchange Traded Funds: A New Investment Option for Taxable Investors, National Bureau of Economic Research Working Paper No. 8781. February.Google Scholar
  14. Ramaswamy, S. (2011). Market Structures and Systemic Risks of Exchange-traded Funds, Bank of International Settlements Working Paper No. 343. April.Google Scholar
  15. Riksbank (2013). “Minutes of the meeting of the Council for Cooperation on Macroprudential Policy held on 1 October 2013.” Stockholm, Sweden: Financial Stability Committee. October.Google Scholar
  16. Riksbank (2014). “Financial Stability Report 2014:2.” Stockholm, Sweden: Riskbank. December.Google Scholar
  17. Shin, H.S. (2013). “The Second Phase of Global Liquidity and Its Impact on Emerging Economies.” Federal Reserve Bank of San Francisco Asia Economic Policy Conference, November.Google Scholar
  18. Singh, M. and Stella, P. (2012). Money and Collateral, International Monetary Fund Working Paper 12/95. April.Google Scholar
  19. Stein, J.C. (2013). “Overheating in Credit Markets: Origins, Measurement, and Policy Responses.” Federal Reserve Bank of St. Louis Research Symposium. February.Google Scholar
  20. UBS (2014). “China Banks: Is This Time Different?” Hong Kong. January. Yellen, J. (2013). Interconnectedness and Systemic Risk: Lessons from the Financial Crisis and Policy Implications. Washington, DC: US Federal Reserve Board. January.Google Scholar

Copyright information

© Marcel Kasumovich 2015

Authors and Affiliations

  • Marcel Kasumovich

There are no affiliations available

Personalised recommendations