Financial regulation: a macro analysis

A report from the Centre for Economic Policy Research applies macroeconomic analysis to the design of financial regulation.

The research proposes several measures to moderate the recurring cycle of financial crises. They argue that a critical component of macro-prudential regulation must be to act as a countervailing force to the natural decline in measured risks in a boom and the rise in measured risks in the subsequent collapse. They suggest counter-cyclical capital charges as a way to counter these excesses.

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