Why is growth in Europe so low? Among the contributing factors, this column highlights the role of financial structure. Intermediation in Europe is heavily bank-based, and the authors' novel empirical findings indicate that such a structure exerts a negative effect on long-run economic growth and exacerbates its response to sharp drops in real estate prices. The findings support policymakers’ efforts to rebalance financial structure towards securities markets.
Sam Langfield, Marco Pagano, 01 February 2016
Laurence J. Kotlikoff, 26 October 2012
The UK’s Independent Commission on Banking set out to make banking safer, to ensure that what just happened won’t happen again, and to change both the structure and regulation of banking as needed. But this column argues that the Commission fails to achieve any of these aims. It instead proposes a new way to make the financial system and wider economy safer.
Markus K Brunnermeier, José De Gregorio, Philip R. Lane, Hélène Rey, Hyun Song Shin, 07 October 2012
Many argue that the financial sector is in dire need of reform but there is always the danger of solving one problem by creating another. This column outlines the findings of the Committee for International Economic Policy and Reform. It takes stock of the traditional case for financial liberalisation and asks which principles have withstood the test of recent events and which ones now need re-thinking.
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.
Jean-Louis Arcand, Enrico Berkes, Ugo Panizza, 07 April 2011
Over the last three decades the US financial sector has grown six times faster than nominal GDP. This column argues that there comes a point when the financial sector has a negative effect on growth – that is, when credit to the private sector exceeds 110% of GDP. It shows that, of the advanced countries currently suffering in the fallout of the global crisis were all above this threshold.
John Muellbauer, 27 November 2008
This column explains the logic behind a radically new form of monetary policy – a new central-bank tool for stabilising the credit cycle. By buying bank stocks and credit instruments at the bottom of the cycle and selling at the top, the new policy could moderate the boom-and-bust credit cycle independently of interest rate policy. The Fed action on 25 November is a good step in this direction.
Tito Boeri, 15 October 2008
Are EU citizens ready to accept the crisis rescue plan that makes massive transfers of resources from taxpayers to the banking sector? This column proposes three ways to share the rescue’s benefits with citizens: increased competition in the banking sector, tax reductions for low-wage earners, and temporary relief schemes for families with mortgage problems.