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Financial crisis response plan

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  • Aldean, Cory

Abstract

Despite the recent highs and lows in international finance, the need for better understanding on the part of policy-makers, business leaders and the general public is evident to address future crisis. The study of other countries’ financial difficulties in recent history seems to be a key element missing in our nation’s response. The economy is too important to leave up to an ill prepared ad hoc emergency meeting. Rather than throwing together a government response, just-in-time at best, it would be advantageous to have a plan ready to pull off the shelf. For such a plan, this paper suggests guiding principles, a plan outline, and options available to the policy-maker in the form of a Financial Crisis Response Plan (FCRP). It should mirror a typical government disaster response plan to some extent, but tailored to assist the Federal government’s response to a myriad of financial crises. The guiding principles for any financial response could be used for a just-in-time response, or for planning and writing plans in between crisis. The plan should be one that is A-political in nature, clearly identifies the problems, considers legal options available, and roles of responders. Such a plan should have strong measurable goals, and strive for universal application, cost savings to the tax-payer, consider all parties welfare including overseas counterparts, and a return to profitable business operations. Any plan developed must be comprehensive to all participating parties, with scheduled training and exercises. Study of past crises and non-traditional sources will not replace but supplement existing principles utilized by government institutions. Several historical works of economists as well as more recent writings like those of Reinhart & Rogoff (2008) touch on financial crisis. The bulk of research for this paper was through foreign central bankers. Central banks have been through similar crises, and have suggested courses of action similar to the FCRP. Additionally, lesser known writers or economists, particularly those outside government payroll or Wall Street, have some value in the discussion. No one person will have all the answers and no single plan will be the ultimate government response, but many options should be explored. Thus, the plan here-in will not attempt to provide all the answers, but a framework for policy-makers (locally and globally) to arrive at those solutions.

Suggested Citation

  • Aldean, Cory, 2010. "Financial crisis response plan," MPRA Paper 28166, University Library of Munich, Germany, revised 27 Jan 2011.
  • Handle: RePEc:pra:mprapa:28166
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    File URL: https://mpra.ub.uni-muenchen.de/28166/1/MPRA_paper_28166.pdf
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    3. O. Emre Ergungor, 2007. "On the resolution of financial crises: the Swedish experience," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Jun.
    4. C.A.E. Goodhart, 2008. "The background to the 2007 financial crisis," International Economics and Economic Policy, Springer, vol. 4(4), pages 331-346, February.
    5. Glenn Hoggarth & Jack Reidhill & Peter Sinclair, 2004. "On the resolution of banking crises: theory and evidence," Bank of England working papers 229, Bank of England.
    6. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    7. Stephany Griffith-Jones & José Antonio Ocampo, 2009. "The Financial Crisis and Its Impact on Developing Countries," Working Papers 53, International Policy Centre for Inclusive Growth.
    8. Allen, Franklin & Gale, Douglas, 1999. "Bubbles, Crises, and Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 9-18, Autumn.
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    More about this item

    Keywords

    The paper recommends a government Financial Crisis Response Plan; with several options and guidelines described.;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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