With the Great Crisis of 2008-2009 we have witnessed a relevant episode of macroeconomic vulnerability affecting many countries. To what extent such vulnerability has depended upon the design of light-touch (LT) banking regulation? We observe an Unpleasant Nexus (UN), i.e. that macroeconomic volatility is associated in a robust and systematic way with LT banking regulation. But the UN does not operate in a vacuum. The link between vulnerability and LT banking regulation seems representative of a more general relationship between institutional design and macroeconomic performance. Our analysis shows how various types of institutions – public, political, legal, monetary – also seem to exert an unexpected effect on resilience.
Dalla Pellegrina, L., Masciandaro, D. (2013). Good Bye Light Touch? Macroeconomic Resilience, Banking Regulation and Institutions. RISK GOVERNANCE & CONTROL: FINANCIAL MARKETS & INSTITUTIONS, 3(1), 18-30.
Good Bye Light Touch? Macroeconomic Resilience, Banking Regulation and Institutions
Dalla Pellegrina, L
;
2013
Abstract
With the Great Crisis of 2008-2009 we have witnessed a relevant episode of macroeconomic vulnerability affecting many countries. To what extent such vulnerability has depended upon the design of light-touch (LT) banking regulation? We observe an Unpleasant Nexus (UN), i.e. that macroeconomic volatility is associated in a robust and systematic way with LT banking regulation. But the UN does not operate in a vacuum. The link between vulnerability and LT banking regulation seems representative of a more general relationship between institutional design and macroeconomic performance. Our analysis shows how various types of institutions – public, political, legal, monetary – also seem to exert an unexpected effect on resilience.
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