Fallacies of market-friendly financial regulation conducted by the Federal Reserve in the 1990s and 2000s
Апстракт
This article draws from the Minskyian/Post-Keynesian literature on the dynamics of the 21st century capitalism and points to the incompatibility between market-efficiency-based micro-prudential regulatory reforms-conducted by the Federal Reserve System in the 1990s-2000s-and financial system stability. We argue that these reforms rested on a twofold efficiency fallacy: efficient financial markets/regulation-free innovative dynamics and informational transparency seeking market-friendly regulation. Thus, the financial instabilities of the 2000s do not rest on accidental strategies of some irrational individuals but on the liberal regulatory changes implemented in the last decades. This article supplies evidence about the prevalence of this theoretical and policy stance, documenting through speeches and hearings given over the period 1999-2010 by the Fed's officials. We then show that major regulatory changes conducted by the Fed were based on micro-prudential measures consistent with th...e blind faith of authorities in the capacity of free financial markets to self-regulate. This faith does not seem to be replaced by an alternative objective regulatory approach even in the aftermath of the world-wide 2007-2008 catastrophe. The major conclusion of this study is that a relevant alternative regulation should rest on a macro-prudential approach seeking to deal with the endogenously unstable dynamics of capitalism.
Кључне речи:
systemic risk / self-regulation / New Neoclassical Synthesis / financial regulation / financial crisis / Federal Reserve SystemИзвор:
Journal of Post Keynesian Economics, 2020, 43, 4, 540-575Издавач:
- Routledge Journals, Taylor & Francis Ltd, Abingdon
DOI: 10.1080/01603477.2020.1734465
ISSN: 0160-3477
WoS: 000518330400001
Scopus: 2-s2.0-85080862412
Институција/група
Sociologija / SociologyTY - JOUR AU - Barredo-Zuriarrain, Juan AU - Ulgen, Faruk AU - Radonjić, Ognjen PY - 2020 UR - http://reff.f.bg.ac.rs/handle/123456789/3183 AB - This article draws from the Minskyian/Post-Keynesian literature on the dynamics of the 21st century capitalism and points to the incompatibility between market-efficiency-based micro-prudential regulatory reforms-conducted by the Federal Reserve System in the 1990s-2000s-and financial system stability. We argue that these reforms rested on a twofold efficiency fallacy: efficient financial markets/regulation-free innovative dynamics and informational transparency seeking market-friendly regulation. Thus, the financial instabilities of the 2000s do not rest on accidental strategies of some irrational individuals but on the liberal regulatory changes implemented in the last decades. This article supplies evidence about the prevalence of this theoretical and policy stance, documenting through speeches and hearings given over the period 1999-2010 by the Fed's officials. We then show that major regulatory changes conducted by the Fed were based on micro-prudential measures consistent with the blind faith of authorities in the capacity of free financial markets to self-regulate. This faith does not seem to be replaced by an alternative objective regulatory approach even in the aftermath of the world-wide 2007-2008 catastrophe. The major conclusion of this study is that a relevant alternative regulation should rest on a macro-prudential approach seeking to deal with the endogenously unstable dynamics of capitalism. PB - Routledge Journals, Taylor & Francis Ltd, Abingdon T2 - Journal of Post Keynesian Economics T1 - Fallacies of market-friendly financial regulation conducted by the Federal Reserve in the 1990s and 2000s EP - 575 IS - 4 SP - 540 VL - 43 DO - 10.1080/01603477.2020.1734465 ER -
@article{ author = "Barredo-Zuriarrain, Juan and Ulgen, Faruk and Radonjić, Ognjen", year = "2020", abstract = "This article draws from the Minskyian/Post-Keynesian literature on the dynamics of the 21st century capitalism and points to the incompatibility between market-efficiency-based micro-prudential regulatory reforms-conducted by the Federal Reserve System in the 1990s-2000s-and financial system stability. We argue that these reforms rested on a twofold efficiency fallacy: efficient financial markets/regulation-free innovative dynamics and informational transparency seeking market-friendly regulation. Thus, the financial instabilities of the 2000s do not rest on accidental strategies of some irrational individuals but on the liberal regulatory changes implemented in the last decades. This article supplies evidence about the prevalence of this theoretical and policy stance, documenting through speeches and hearings given over the period 1999-2010 by the Fed's officials. We then show that major regulatory changes conducted by the Fed were based on micro-prudential measures consistent with the blind faith of authorities in the capacity of free financial markets to self-regulate. This faith does not seem to be replaced by an alternative objective regulatory approach even in the aftermath of the world-wide 2007-2008 catastrophe. The major conclusion of this study is that a relevant alternative regulation should rest on a macro-prudential approach seeking to deal with the endogenously unstable dynamics of capitalism.", publisher = "Routledge Journals, Taylor & Francis Ltd, Abingdon", journal = "Journal of Post Keynesian Economics", title = "Fallacies of market-friendly financial regulation conducted by the Federal Reserve in the 1990s and 2000s", pages = "575-540", number = "4", volume = "43", doi = "10.1080/01603477.2020.1734465" }
Barredo-Zuriarrain, J., Ulgen, F.,& Radonjić, O.. (2020). Fallacies of market-friendly financial regulation conducted by the Federal Reserve in the 1990s and 2000s. in Journal of Post Keynesian Economics Routledge Journals, Taylor & Francis Ltd, Abingdon., 43(4), 540-575. https://doi.org/10.1080/01603477.2020.1734465
Barredo-Zuriarrain J, Ulgen F, Radonjić O. Fallacies of market-friendly financial regulation conducted by the Federal Reserve in the 1990s and 2000s. in Journal of Post Keynesian Economics. 2020;43(4):540-575. doi:10.1080/01603477.2020.1734465 .
Barredo-Zuriarrain, Juan, Ulgen, Faruk, Radonjić, Ognjen, "Fallacies of market-friendly financial regulation conducted by the Federal Reserve in the 1990s and 2000s" in Journal of Post Keynesian Economics, 43, no. 4 (2020):540-575, https://doi.org/10.1080/01603477.2020.1734465 . .