Financial Regulation and Stability
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Financial Regulation and Stability

Lessons from the Global Financial Crisis

Charles Goodhart and Dimitrios P. Tsomocos

This book addresses the interaction of monetary and regulatory policy to achieve the important goal of price and financial stability. The authors show how financial stability can be assessed and measured continuously, and discuss 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, and requires a general equilibrium model. Their general equilibrium analysis demonstrates how policy should depend on understanding all the relevant factors.
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Chapter 12: International Monetary Regimes

Charles A.E. Goodhart and Dimitrios P. Tsomocos

Abstract

International monetary relationships have been under strain in recent years. This is largely because adjustment mechanisms are asymmetric; the IMF has no means of putting pressure on countries with large current account surpluses to adjust. But such countries’ accompanying capital account outflows have often had disappointing returns. So, we propose a method to impose symmetric constraints on the net capital flows both of deficit and surplus countries.

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