| Title | Monetary policy and macro-prudential regulation: the risk-sharing paradigm |
| Publication Type | Journal Article |
| Year of Publication | 2013 |
| Authors | Mian A |
| Journal | Journal Economía Chilena (The Chilean Economy) |
| Volume | 16 |
| Pagination | 54–66 |
| Abstract | How should monetary policy and macro-prudential regulation respond to the dangers of financial bubbles? I argue that bubbles - and their collapse - become a serious problem when there is inadequate risk-sharing. Neither monetary policy nor traditional macro-prudential regulation is designed to deal with this risk-sharing problem. Monetary policy has little hope of either accurately anticipating bubbles or dealing effectively with their consequences. Traditional approaches to macro-prudential regulation are unlikely to succeed as they are based on the false premise that risk can always be quantified up front. I propose considering "ex-ante flexible contracting" as a longer-term response to the financial stability question. |
| URL | http://si2.bcentral.cl/public/pdf/revista-economia/2013/ago/recv16n2ago2013pp54-66.pdf |
