Financial stability: to regulate or not? A public choice inquiry

Le, Vo Phuong Mai ORCID: https://orcid.org/0000-0003-3374-9694, Meenagh, David ORCID: https://orcid.org/0000-0002-9930-7947 and Minford, Patrick ORCID: https://orcid.org/0000-0003-2499-935X 2018. Financial stability: to regulate or not? A public choice inquiry. Journal of International Financial Markets, Institutions and Money 57 , pp. 127-140. 10.1016/j.intfin.2018.07.004

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Abstract

The paper takes the stand that the central banks as financial regulators have their own interest in imposing more regulations. It models the institutional behaviour for the central bank and government using the Indirect Inference testing and estimation method and it finds a set of coefficients of the model that can generate the actual observed behaviour for the US. The paper establishes that good monetary policy can reduce instability. Regulation at worse destabilises the economy and at best contributes little to stabilise the economy. After the financial crisis, financial regulations were too severe and thus actually increased instability.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Advanced Research Computing @ Cardiff (ARCCA) Business (Including Economics)
Publisher:	Elsevier
ISSN:	1042-4431
Date of First Compliant Deposit:	10 August 2018
Date of Acceptance:	16 July 2018
Last Modified:	07 Nov 2023 00:14
URI:	https://orca.cardiff.ac.uk/id/eprint/114100

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