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Where to From Here?: Lessons for Research, Policy and the Industry

In: The First Credit Market Turmoil Of The 21st Century Implications for Public Policy

Author

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  • Philipp Hartmann

    (Financial Research Division, European Central Bank, Germany)

Abstract

The market turmoil that is ongoing while we are meeting here in Chicago has illustrated a fundamental problem in economic policy. There are two views on financial systems. In one view, financial systems are an indispensable engine of growth and development. They distribute savings and idle funds to productive real investments and consumption. By reallocating funds from less promising firms and industries to firms and industries with good growth prospects they contribute to the Schumpeterian process of “creative destruction”. In the other view, financial systems are inherently fragile. Stricken by maturity mismatches, asymmetric information, strong interconnectedness, leverage, and governance problems they are prone to recurrent crises often with severe adverse consequences for the real economy.

Suggested Citation

  • Philipp Hartmann, 2009. "Where to From Here?: Lessons for Research, Policy and the Industry," World Scientific Book Chapters, in: Douglas D Evanoff & Philipp Hartmann & George G Kaufman (ed.), The First Credit Market Turmoil Of The 21st Century Implications for Public Policy, chapter 21, pages 347-352, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814280488_0021
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