Financial Regulation and Stability (eBook)

'This is a most useful book which nicely combines theory and practice. In it the authors provide a framework which helps us better understand the nature of modern financial crises and how monetary and regulatory policies interact in delivering price and financial stability. Certainly worth reading by academics, policymakers and all those interested in deepening their knowledge of how modern financial systems work in both good and bad times.'- Jose Vinals, Standard Chartered, UK 'This collection of papers is a remarkable tour de force. Goodhart and Tsomocos have made pioneering steps toward understanding the causes of financial crises and showing how the financial system can be regulated to reduce and mitigate them. A must-read for anyone interested in financial stability.'- Doyne Farmer, University of Oxford, UK'Today almost everyone realizes the crucial importance of liquidity, a painful lesson taught by the global financial crisis. This collection records that Goodhart and Tsomocos were early and persistent voices, initially in the wilderness but now almost mainstream, showing the way forward by clothing old wisdom in new modelling.'- Perry G. Mehrling, Columbia University, US Charles Goodhart and Dimitrios P. Tsomocos examine the interaction of monetary and regulatory policy to achieve the important goals of price and financial stability. Their focus is on the relationship between liquidity and default in the post-crisis context, with special emphasis on macroprudential regulation. Exploring how financial stability can be continually assessed and measured, Financial Regulation and Stability discusses the interrelationships between liquidity and default. Without default there would be no concern about liquidity. But the financial crisis was not just a liquidity problem, it requires a general equilibrium model. The authors' model delineates all the potential interrelationships between the real and financial sectors of the economy, with special emphasis on the interaction between liquidity and default. Economists and central bankers will greatly benefit from the practical advice offered in this book to aid financial stability. Advanced students of financial economics will also find this a vital read to understand the consequences of the 2007-8 financial crisis in more depth and the lessons to be learnt.