Open AccessGood bye light touch? Macroeconomic resilience, banking regulation and institutions
Author(s) -
Lucia Dalla Pellegrina,
Donato Masciandaro
Publication year - 2013
Publication title -
risk governance and control: financial markets and institutions
Language(s) - English
Resource type - Journals
eISSN - 2077-4303
pISSN - 2077-429X
DOI - 10.22495/rgcv3i1art2
Subject(s) - nexus (standard) , vulnerability (computing) , volatility (finance) , resilience (materials science) , macroprudential regulation , psychological resilience , politics , financial regulation , economics , monetary economics , financial system , business , financial crisis , macroeconomics , political science , finance , systemic risk , psychology , computer security , law , physics , thermodynamics , computer science , psychotherapist , embedded system
With the Great Crisis of 2008-2009 we have witnessed a relevant episode of macroeconomic vulnerability affecting many countries. To what extent such vulnerability has depended upon the design of light-touch (LT) banking regulation? We observe an Unpleasant Nexus (UN), i.e. that macroeconomic volatility is associated in a robust and systematic way with LT banking regulation. But the UN does not operate in a vacuum. The link between vulnerability and LT banking regulation seems representative of a more general relationship between institutional design and macroeconomic performance. Our analysis shows how various types of institutions – public, political, legal, monetary – also seem to exert an unexpected effect on resilience.