Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

Examines the rise of financialisation globally, charting drawbacks and prescribing suggestions for a definitive overhaul of the structure.

"We live in an age that demonstrates the powerful need for ethics in government. Democracy is a privilege that carries with it important responsibilities for the people and their representatives. As we look back on this era and determine the future of this nation, Dr. Long Thompson's book will be a resource for Americans who are seeking ways to secure our democracy and our future as a nation." Congressman John Lewis, Georgia's 5th District. Ethical leadership, steeped in integrity and fairness, matters. The future of our nation and our world depends upon the quality of America's character. In this uncompromising, absorbing look at our government and society today, Jill Long Thompson persuasively argues that we all have a meaningful role to play in shaping America's character and future. The citizenry, as well as their elected officials, are responsible for protecting fairness of participation and integrity in elections, as well as in the adoption and execution of laws. In this troubling time when the public is losing trust and confidence in our government, Jill Long Thompson shows us a bipartisan way forward.

This global handbook provides an up-to-date and comprehensive overview of shadow banking, or market-based finance as it has been recently coined. Engaging in financial intermediary services outside of normal regulatory parameters, the shadow banking sector was arguably a critical factor in causing the 2007-2009 financial crisis. This volume focuses specifically on shadow banking activities, risk, policy and regulatory issues. It evaluates the nexus between policy design and regulatory output around the world, paying attention to the concept of risk in all its dimensions—the legal, financial, market, economic and monetary perspectives. Particular attention is given to spillover risk, contagion risk and systemic risk and their positioning and relevance in shadow banking activities. Newly introduced and incoming policies are evaluated in detail, as well as how risk is managed, observed and assessed, and how new regulation can potentially create new sources of risk. Volume I concludes with analysis of what will and still needs to happen in the event of another crisis. Proposing innovative suggestions for improvement, including a novel Pigovian tax to tame financial and systemic risks, this handbook is a must-read for professionals and policy-makers within the banking sector, as well as those researching economics and finance.

The deferred recognition of COVID-induced losses at banks in many countries has reignited the debate on regulatory forbearance. This paper presents a model where the public's own political pressure drives regulatory policy astray, because the public is poorly informed. Using probabilistic game stages, the model parameterizes how time consistent policy is. The interaction between political motivations and time consistency is novel and complex: increased policy credibility can entice the politically-motivated regulator to act in the public's best interest, or instead repel it from doing so. Considering several regulatory instruments, the paper probes the nexus of political pressure, perverse bank incentives and time inconsistent policy.