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Three Principles for Market-Based Credit Regulation

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  • Perry Mehrling
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    Abstract

    A key lesson of the financial crisis 2007-09 is that the Bagehot Rule, "lend freely but at a high rate," needs to be updated for the emerging market-based credit system. A modern rule is suggested: Markets, not Banks; Outside spread, not Inside spread; Core, not Periphery.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.107
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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 102 (2012)
    Issue (Month): 3 (May)
    Pages: 107-12

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    Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:107-12

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    1. Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
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