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Policy Inertia and the Persistence of Systemic Fragility
Author(s) -
MÜGGE DANIEL
Publication year - 2014
Publication title -
the political quarterly
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.373
H-Index - 37
eISSN - 1467-923X
pISSN - 0032-3179
DOI - 10.1111/1467-923x.12124
Subject(s) - systemic risk , underpinning , financial fragility , prosperity , fragility , economics , financial crisis , financial sector , persistence (discontinuity) , market economy , financial system , monetary economics , macroeconomics , finance , economic growth , engineering , chemistry , civil engineering , geotechnical engineering
Many observers have diagnosed a fundamental shift in financial regulation since the 2008 crisis. In contrast, this article argues that changes have mostly been superficial. The ideas underpinning regulation have been adapted rather than overturned. Our financial system remains highly fragile, even if exceptionally loose monetary policy obscures such fragility temporarily. Governments show little appetite to correct the lopsided relationship between the financial sector and the real economy and turn the sector into a reliable engine of prosperity and stability rather than a continued source of systemic risk.