Regulatory Cycles: Revisiting the Political Economy of Financial Crises

January 15, 2018

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Format: Chicago

Jihad Dagher. Regulatory Cycles: Revisiting the Political Economy of Financial Crises, (USA: International Monetary Fund, 2018) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.

Subject: Banking, Banking crises, Financial crises, Financial regulation and supervision, Global financial crisis of 2008-2009, Housing, National accounts, Stock markets

Keywords: Banking crises, Banking sector, Boom-Bust Cycles, Bubble company, Central bank, Crony capitalism, Financial bubble, Financial Crises, Financial market, Financial Regulation, Glass-Steagall Act, Global, Global financial crisis of 2008-2009, Government sponsorship, Housing, Incumbent governments policy, Joint stock, Joint-stock bank, Plain vanilla, Political economy, Ruling party, Share price, South America, Stock index, WP

Publication Details

Pages:

89
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/008
Stock No:

WPIEA2018008
ISBN:

9781484337745
ISSN:

1018-5941

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