نقش مقررات مالی و نوآوری در بحران مالی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|5657||2012||11 صفحه PDF||سفارش دهید||9300 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Financial Stability, Available online 2 August 2012
Using the financial and macroeconomic dataset of 132 countries, this study empirically analyzes the effects of financial regulations and innovations on the global financial crisis. It shows that regulatory measures such as restrictions on bank activities and entry requirements have decreased the likelihood of a banking crisis, while capital regulation and government ownership of banks have increased the likelihood of a currency crisis. Financial innovation has contributed to the banking crisis but contained the currency crisis. This study also shows that judicious implementation of regulatory measures is critical to financial stability because some regulations, if implemented simultaneously, can further aggravate or alleviate a crisis.
The global financial crisis, starting with the housing bubble and credit boom in 2007 and peaking with the housing bust and collapse of Lehman Brothers in September 2008, has led to a global recession and a loss of confidence in the financial system. In spite of a few positive signs in key economic indicators, the world economy in 2012 remains fragile and uncertain. Recent financial crises have been characterized by their global scale in which a downward economic spiral in one country quickly spreads to other countries. The recent sovereign debt crisis in Greece has had severe contagious effects on other countries in Europe and beyond. The extent and impact of these crises vary by country, which raises an important research question of examining the determinants that affect the degree and frequency of financial crises. Several studies show that deregulation and hyperactive financial innovations in the financial sector have caused various types of financial crises during the past few decades (Morris and Shin, 1998 and Reinhart and Rogoff, 2008). Regulatory and supervisory agencies in many countries have failed to keep abreast of the rapidly evolving development of the financial industry and its myriad products and practices. Risky lending and investment practices by financial institutions in the recent crisis might have stemmed from lax regulations on the financial sector. While Eichengreen and Portes (1987) argue that strong regulations and sound institutional frameworks help stabilize financial markets by reducing the moral hazard problems associated with asymmetric information, Barth et al. (2004) show that restrictions on bank activities may contribute to financial crises because banks are not able to diversify into other financial activities to reduce risks. In addition, recent financial crises might also have been caused by excessive reliance on financial innovations such as mortgage-backed securities (MBS), collateralized debt obligations (CDO) and credit default swaps (CDS). Securitizations such as MBS and CDO led to the credit boom and asset bubble because the risks associated with the underlying assets are transferred to investors (Keys et al., 2010). Derivatives such as CDS are used as protection against defaults on bonds or loans but have exposed the financial sector to systemic risks through excessive leveraging and speculative investments (Dodd, 2002). The objective of this study is to empirically analyze how (de)regulatory measures and financial innovation have contributed to the recent global financial crisis, using the financial and macroeconomic data of 132 countries. This study examines the fundamental role of regulations to explain the causes of the recent global crisis and discusses long-term structural reforms in the financial sector. This study is close to those of Barth et al. (2004) and Beck et al. (2006), which use cross-country data to examine the role of regulation in financial crises. However, those studies might have the reverse causality problem in which the financial crises data were collected for the 1980s and 1990s, while the regulatory data were from 1999. With the dataset of more recent financial crises for 132 countries that reflect a variety of preceding regulatory systems, this study systematically examines the effects of regulations on the global financial crises. This study also analyzes the relation between financial innovation and the recent global financial crisis using an aggregate index for assessing the extent of financial innovation in a country. By examining the roles of several types of regulatory measures and financial innovations, this study provides the following main results. First, in terms of individual regulatory measures, this study shows that countries with strong restrictions on bank activities and entry requirements are less likely to experience a banking crisis. Second, various regulatory measures, if implemented simultaneously, can have aggravating or alleviating effects on a crisis, suggesting that partial analysis of the effect of individual measures may lead to misleading policy implications. This study illustrates the complex mechanisms of regulations in influencing the banking sector and foreign exchange market. Third, while financial innovation increased the chance of the banking crisis, it alleviated the risk of the currency crisis. This study is organized as follows. Section 2 reviews the literature on the various types of financial crises and their relationships with financial regulations and innovations, followed by several testable hypotheses drawn from the literature. Section 3 describes the sources of data and explains each variable used in the empirical model. After presenting the estimation methodology, Section 4 uses several regression models to analyze the effects of each variable on the financial crises. Section 5 provides the conclusion and a few policy implications.
نتیجه گیری انگلیسی
This study used a global dataset of 132 countries to examine the effects of various types of regulatory measures and financial innovation on the recent financial crisis. The empirical results show that the effects of these variables on the crisis are much more nuanced and complex than suggested by existing studies, and we cannot make a sweeping judgment on the roles of deregulations and hyperactive financial innovations in the financial sector. Regulatory measures such as stronger restrictions on bank activities and strengthened entry requirements have decreased the probability of banking crises. While capital regulation and government ownership of banks have positive effects on the likelihood of currency crises, official supervisory power has a negative effect. Another important result of this study is that some regulatory combinations can have countervailing effects on financial stability. For example, though implementation of strong entry requirements alone contains a banking crisis, it can aggravate the crisis if implemented simultaneously with greater diversification. While excessive use of financial innovation contributed to the recent banking crisis, it contained the currency crisis. However, a caveat should be mentioned about the implication of financial innovation since valid data were available only for a part of the sample. The recent global crisis has led to unprecedented international cooperation. The G20 mandated its Financial Stability Board (FSB) to develop strong regulatory and supervisory policies for financial stability and to coordinate comprehensive global regulatory reform. The results of this study can provide some insights for implementing global financial regulatory reforms. First, while Basel III is designed for banks and supervisors to monitor Liquidity Coverage Ratio in significant currencies under newly adopted liquidity standards, it still remains a question whether the procyclicality of the capital requirements with regard to the currency crisis risk can be mitigated under the capital framework of Basel III. Second, newly proposed regulatory measures should be carefully evaluated because their combinatory effects can have very different implications from the individual effects. Third, several groups have recommended reforms on financial innovations such as OTC derivatives and venture capital and private equity. The effects of financial innovation may depend on the type of crisis, and careful evaluation of the environments will help achieve financial stability without stifling innovation. This study can be extended in a few directions. First, while this study addresses the problem of reverse causation by using 2005–2006 regulatory data and 2007–2009 financial crisis data, there could be a longer time lag between the implementation of regulations and their detectable effects in the financial sector. The current European debt crisis illustrates that there might be a time lag between the banking crisis and the debt crisis, and consideration of this lag will provide further insights of various determinants. Second, regulatory variables in this study include only those related to the banking industry. Future studies can also consider the measures in other financial sectors such as the insurance industry, bond market and foreign exchange markets. Third, the use of more extensive cross-county data on financial innovation, including sophisticated indicators (e.g., foreign exchange or currency swaps), can provide further insights, though the availability of relevant data presents a major obstacle. Fourth, financial fragility may also be related to the generosity of deposit insurance, financial openness or legal origin, and consideration of these additional variables is another extension of this study.