Why do we need a financial sector?

Moderator:  Wouter den Haan

  • Wouter den Haan, 24 October 2011

    This column launches a new Vox Debate titled “Why do we need a financial sector and how much should we pay for it”. The column argues standard measures of the financial sector’s economic contribution overestimate its true value to a modern economy. As such, regulation that makes it more difficult for the sector to perform some activities is not necessarily a bad thing.

  • Charles A.E. Goodhart, 31 October 2011

    As protestors occupy Wall Street and financial centres around the world, among the grievances are “socially useless” investment banks. This column argues, however, that investment banking is critical to any effective economy – the idea that policymakers can safeguard retail banking alone is not only tragically mistaken but also horribly dangerous.

  • Alexander Popov, Frank Smets, 03 November 2011

    Well-developed financial systems play a crucial role in stimulating growth but are associated with more frequent financial shocks and higher macroeconomic risk, as the financial crisis of 2007–09 reminded us. This column argues that the goal of financial regulation must be to reduce systemic risk without eliminating the financial sector’s contribution to long-term economic growth.

  • Wouter den Haan, Vincent Sterk, 08 November 2011

    Financial institutions played a leading role in the global crisis, and policymakers are under pressure to do something about them. This column argues that before any draconian measures are passed, we need to be reminded of the benefits of the financial sector and the innovation it provides.

  • Andrew G Haldane, Vasileios Madouros, 22 November 2011

    While few would argue that the financial crisis has not brought the real economy down with it, there is considerably less clarity about what the positive contribution of the financial sector is during normal times. This lead commentary in the current Vox debate on the issue focuses on the value-added of risk and government subsidies in national accounting, and makes an important distinction between risk-taking and risk management.

  • Thomas Philippon, 02 December 2011

    Has the financial industry become less efficient? This lead commentary in the Vox debate on the financial sector argues that, despite all of its fast computers and credit derivatives, the current financial system is no better at transferring funds from savers to borrowers than the financial system of 1910.

  • Christina Wang, 08 December 2011

    The financial system is like an organ in the body of the economy. But is it the heart or the appendix? This column, part of the Vox Debate on whether we need a financial sector, argues that we should measure the value banks create through their management of risk, not simply their bearing of risk. Under this measure, banks may well be less valuable to the economy.

Latest Debate Commentaries

  • Growth and jobs in Europe: Which way now? (Has austerity gone too far?)

    Anis Chowdhury, United Nations ESCAP, 20 November 2014

    Anis Chowdhury (United Nations Economic and Social Commissions for Asia and the Pacific) and Iyanatul Islam (International Labour Organization).Whether it is EU28 or EA18, the European region has suffered two to three years of negative growth between 2008 and 2014. The projected recovery in 2015 is well below the rate of growth that is expected to be achieved by other advanced economies.1 Some...
  • Anis Chowdhury, United Nations ESCAP, 26 September 2014

    On 9 September, 2014, a large majority of member States mandated the UN to create a “multilateral legal framework for sovereign debt restructuring”. The resolution (A/68/L.57/Rev2) commits the General Assembly to agree on modalities, or the terms and logistics, for commencing open, intergovernmental negotiations on a sovereign debt restructuring framework by the end of 2014.  Subsequently, the...
  • Anis Chowdhury, United Nations ESCAP, 18 June 2014

    Iyanatul Islam, Chief, Employment and Labour Market Policies Branch, Employment Policy Department, ILO, Geneva Anis Chowdhury, Director, Macroeconomic Policy and Development Division, UN-ESCAP Introduction The traditional discourse in development economics focussed on issues of underemployment, poverty and structural transformation. However, these issues receded into the background with the...
  • Anis Chowdhury, United Nations ESCAP, 21 January 2014

    By Iyanatul Islam (ILO) and Anis Chowdhury (UN-ESCAP)1,2 Conventional macroeconomics as applied to developing economies is part of an overall framework that has a rather narrow conceptualization of economic stability based on certain thresholds: low, single digit inflation (usually less than 5%), fiscal deficits of less than 3% of GDP, debt to GDP ratio of 40% or less, and foreign exchange...
  • Dr Mark Fernando, Humanitarian Healthcare, 30 August 2013

      This Advisory Paper is intended to assist in securing economic stability, whilst ensuring that humanitarian interventions can have the very strongest possible impact and are effective, combined with an Economics and Diplomacy Model that can provide for a regionally and internationally acceptable mechanism that can ensure peacemaking is successful in the context of enabling public security to be...
  • Dr Mark Fernando, Humanitarian Healthcare, 30 August 2013

      This Advisory Paper is intended to assist in securing economic stability, whilst ensuring that humanitarian interventions can have the very strongest possible impact and are effective, combined with an Economics and Diplomacy Model that can provide for a regionally and internationally acceptable mechanism that can ensure peacemaking is successful in the context of enabling public security to be...
  • Dr Mark Fernando, Humanitarian Healthcare, 30 August 2013

      This Advisory Paper is intended to assist in securing economic stability, whilst ensuring that humanitarian interventions can have the very strongest possible impact and are effective, combined with an Economics and Diplomacy Model that can provide for a regionally and internationally acceptable mechanism that can ensure peacemaking is successful in the context of enabling public security to be...
  • Dr Mark Fernando, Humanitarian Healthcare, 30 August 2013

      This Advisory Paper is intended to assist in securing economic stability, whilst ensuring that humanitarian interventions can have the very strongest possible impact and are effective, combined with an Economics and Diplomacy Model that can provide for a regionally and internationally acceptable mechanism that can ensure peacemaking is successful in the context of enabling public security to be...
  • Reaction to Haldane (What’s the use of economics?)

    Simon Wren-Lewis, Oxford University, 08 October 2012

    I am, like many, in awe of Bank of England director and economist Andy Haldane. However I did wince a bit at his Lead Commentary for the recent Vox debate on economics (Haldane 2012 ). He looks at the extent economists are to blame for the financial crisis, and he makes two interrelated claims. Having noted that central banks have traditionally been concerned with the “interplay of bank money and...
  • Fiscal Rules – Help or hindrance? (Development and the crisis, Has austerity gone too far?)

    Anis Chowdhury, United Nations ESCAP, 04 October 2012

    Anis Chowdhury (United Nations Economic and Social Commissions for Asia and the Pacific) and Iyanatul Islam (International Labour Organization). A fiscal rule represents legislated and long-term numerical limits on budgetary aggregates pertaining to debts, deficits, expenditures and revenues. In a recent IMF working paper1, Schaechter et al (2012) have reported on a database of fiscal rules...