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Financial Regulation Going Forward

Author

Listed:
  • Franklin Allen

    (Professor, University of Pennsylvania(E-mail: allenf@wharton.upenn.edu))

  • Elena Carletti

    (Professor, European University Institute(E-mail: Elena.Carletti@EUI.eu))

Abstract

The financial sector is heavily regulated in order to prevent financial crises. The recent crisis showed how ineffective this regulation and other types of government intervention were in achieving this aim. We argue that the crisis was primarily caused by housing price bubbles. These occurred because of too loose monetary policies and the easy availability of credit resulting from the build up of large foreign exchange reserves by Asian central banks. A number of regulatory reforms are suggested. It is also argued that central banks need to have more checks and balances. Finally, the international financial architecture needs to be changed so that Asian countries do not feel the need to accumulate large foreign exchange reserves.

Suggested Citation

  • Franklin Allen & Elena Carletti, 2010. "Financial Regulation Going Forward," IMES Discussion Paper Series 10-E-18, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:10-e-18
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    File URL: http://www.imes.boj.or.jp/research/papers/english/10-E-18.pdf
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    References listed on IDEAS

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    Cited by:

    1. Shigenori Shiratsuka & Wataru Takahashi & Yuki Teranishi & Kozo Ueda, 2010. "Future of Central Banking under Globalization: Summary of the 2010 International Conference Organized by the Institute for Monetary and Economic Studies of the Bank of Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 1-16, November.

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    More about this item

    Keywords

    Bubbles; Monetary Policy; Global Imbalances;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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