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Regulatory Reform: Integrating Paradigms

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  • Augusto de la Torre
  • Alain Ize

Abstract

What were the market and regulatory issues that led to the subprime crisis? How should prudential regulation be fixed? The answers depend on the interpretive lenses - or 'paradigms'- through which one sees finance. The agency paradigm, which has dominated recent regulatory policy and provides the most popular interpretation of the crisis, seems to be influencing much of the emerging reform agenda. But collective welfare failures (particularly externalities) and collective cognition failures (particularly mood swings) were as important, if not more so, in driving the crisis. These three paradigms should therefore be integrated into a more balanced policy agenda. But doing so will be difficult because they often have inconsistent policy implications. Copyright 2010 Blackwell Publishing Ltd

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Article provided by Wiley Blackwell in its journal International Finance.

Volume (Year): 13 (2010)
Issue (Month): 1 (03)
Pages: 109-139

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Handle: RePEc:bla:intfin:v:13:y:2010:i:1:p:109-139

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Citations

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Cited by:
  1. de la Torre, Augusto & Feyen, Erik & Ize, Alain, 2011. "Financial development : structure and dynamics," Policy Research Working Paper Series 5854, The World Bank.
  2. Masciandaro, Donato & Pansini, Rosaria Vega & Quintyn, Marc, 2013. "The economic crisis: Did supervision architecture and governance matter?," Journal of Financial Stability, Elsevier, vol. 9(4), pages 578-596.
  3. Anginer, Deniz & de la Torre, Augusto & Ize, Alain, 2011. "Risk absorption by the state: when is it good public policy ?," Policy Research Working Paper Series 5893, The World Bank.
  4. Augusto de la Torre & Alain Ize, 2009. "Containing Systemic Risk : Are Regulatory Reform Proposals on the Right Track?," World Bank Other Operational Studies 10967, The World Bank.
  5. Anginer, Deniz & de la Torre, Augusto & Ize, Alain, 2014. "Risk-bearing by the state: When is it good public policy?," Journal of Financial Stability, Elsevier, vol. 10(C), pages 76-86.
  6. Gabriel Aparici & Fernando SepĂșlveda, 2010. "Household Credit Markets During the Financial Crisis of 2008/2009," Working Papers Central Bank of Chile 591, Central Bank of Chile.
  7. de la Torre, Augusto & Ize, Alain, 2011. "Containing systemic risk : paradigm-based perspectives on regulatory reform," Policy Research Working Paper Series 5523, The World Bank.
  8. Beck, Thorsten & Feyen, Erik, 2013. "Benchmarking financial systems : introducing the financial possibility frontier," Policy Research Working Paper Series 6615, The World Bank.
  9. de la Torre, Augusto & Ize, Alain, 2013. "The rhyme and reason for macroprudential policy : four guideposts to find your bearings," Policy Research Working Paper Series 6576, The World Bank.
  10. Giovanni Majnoni & Andrew Powell, 2011. "On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies," Research Department Publications 4726, Inter-American Development Bank, Research Department.
  11. Marc Quintyn & Rosaria Vega Pansini & Donato Masciandaro, 2011. "The Economic Crisis," IMF Working Papers 11/261, International Monetary Fund.
  12. Canuto, Otaviano, 2011. "How Complementary Are Prudential Regulation and Monetary Policy?," World Bank - Economic Premise, The World Bank, issue 60, pages 1-7, June.
  13. de la Torre, Augusto & Didier, Tatiana & Pinat, Magali, 2014. "Can Latin America tap the globalization upside ?," Policy Research Working Paper Series 6837, The World Bank.
  14. Beck, Thorsten, 2010. "Regulatory Reform After the Crisis: Opportunities and Pitfalls," CEPR Discussion Papers 7733, C.E.P.R. Discussion Papers.
  15. Canuto, Otaviano & Cavallari, Matheus, 2013. "Monetary policy and macroprudential regulation : whither emerging markets," Policy Research Working Paper Series 6310, The World Bank.
  16. Majnoni, Giovanni, 2010. "The co-movement of asset returns and the micro-macro focus of prudential oversight," Policy Research Working Paper Series 5456, The World Bank.

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