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Has the Regulatory Cycle Weakened? Evidence from a Century of Financial Legislation

Author

Listed:
  • Albers, Thilo Nils Hendrik
  • Nützenadel, Alexander
  • Scheib, Tobias

Abstract

The regulatory cycle view suggests that periods of deregulation encourage increased risk-taking, which in turn leads to financial crises and subsequent re-regulation. To test this proposition, we develop a novel 10-item index capturing prudential and structural banking regulation across 14 countries over the past century. We find that deregulation is indeed associated with heightened risk appetite and credit expansion. However, the regulatory response to financial crises has changed significantly over time. Consistent with the financial trilemma, the evidence suggests that the cycle has weakened, as open capital accounts are increasingly incompatible with effective regulation at the national level.

Suggested Citation

  • Albers, Thilo Nils Hendrik & Nützenadel, Alexander & Scheib, Tobias, 2026. "Has the Regulatory Cycle Weakened? Evidence from a Century of Financial Legislation," CEPR Discussion Papers 21419, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21419
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    File URL: https://cepr.org/publications/DP21419
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    More about this item

    JEL classification:

    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

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