Public good,collective action and financial regulation

The economy‐wide liberalization reforms implemented from the 1980s onwards in major capitalist economies had deep impact on financial markets. Public financial regulation has been replaced by self‐regulation, financial innovations proliferated and gave rise to many diversified and complex speculative operations that financialized most economic decisions and actions. Recurrent instabilities and crises became common ground in advanced as well as in emerging market economies and converged on the global systemic crisis in 2007–08, notwithstanding the efficient market doctrine that kept supporting financial liberalization. This crisis raised concerns about the relevance of market‐based financial regulation with regard to the systemic viability of capitalist economies and brought forward the central role of financial regulatory framework in the sustainable working of open societies. This article considers financial stability as a collective action problem through the lens of the literature on the commons and public goods. It seeks to contribute to the development of a relevant paradigm of collective action in the provision of a particular public good, financial stability, through a particular public action, financial regulation. After recalling the broad outlines of the evolution of financial markets and the institutional environment in the last decades, the monetary and financial characteristics of a capitalist economy are presented. The monetary and financial structure turns out to be a public infrastructure. The criticalness of financial transactions for the whole economic society together with the non‐rivalrousness and non‐excludability of financial stability determine the very publicness of the latter. The continuity of financial relations fundamentally needs a viable financial system. However, this is a complex issue as it falls into the classical opposition “private vs public” and calls for a collective action framework consistent with the characteristics of a financialized economy. This article argues that financial stability cannot be ensured through individual‐decision‐based market relations because of the endogenous limits of individual actions and the systemic nature of instabilities they can provoke. A specific treatment of finance as a public utility and of financial stability as a public good is then required. The study on the organization and management of financial markets, namely financial governance issue, ultimately leads to consider financial regulation as a collective action problem that calls for a public supervision framework through an extra‐market macroregulation, apt to allow economy to work in a viable way.     

Systemic risk in market microstructure of crude oil and gasoline futures prices: A Hawkes flocking model approach

We propose the Hawkes flocking model that assesses systemic risk in high-frequency processes at the two perspectives—endogeneity and interactivity. We examine the futures markets of West Texas Intermediate (WTI) crude oil and gasoline for the past decade, and perform a comparative analysis with conditional value-at-risk as a benchmark measure. In terms of high-frequency structure, we derive the empirical findings. The endogenous systemic risk in WTI was significantly higher than that in gasoline, and the level at which gasoline affects WTI was constantly higher than that in the opposite case. Moreover, although the relative influence's degree was asymmetric, its difference has gradually reduced.     

Systemic Risks Spillovers and Interdependence among Stock Markets: International Evidence with Covar‐Copulas

Empirical studies have provided ample evidence on the potential benefits of international diversification with portfolios that consist of both domestic and foreign assets. This coupled with sudden and periodic crashes in global and developed equity markets have stimulated the interest of investors to diversify across markets that have the potential to provide decorrelation with global markets during turbulent periods. At the same time, international diversification may intensify cross‐border listing of stocks with its antecedent implication of shocks transmission. The above have engendered renewed interest among researchers to explore the dependence levels and spillover effects of shocks among emerging and developed equity markets. This paper examines tail dependence structure and (extreme) systemic risks spillover effects among international equity markets using advanced econometric techniques that underpin the modelling of asset returns. We find evidence of low positive significant dependencies between all African markets and their developed counterparts, except for Egypt. Although no evidence of spillover effects to the markets in Africa was found, both unidirectional and bi‐directional causality between some African and developed equity markets is found, albeit with differences. We are unable to ascribe the dynamics in the causality structure to level of market integration. It is inferred that the degree of individual local markets interdependence with developed counterparts may reflect the relative size, liquidity and degree of foreign investors' participation.     

Evidence of Credit Risk Contagion Between Corporate and Financial Sectors

We propose a copula-GARCH framework to analyze the credit risk dependence structure between the European corporate and financial sectors. Empirical study is conducted on two representative iTraxx indices. In order to better capture the dynamic behavior of dependence we allow copula parameters to be time-varying by specifying them as a function of past values and standardized score of the copula log-likelihood. The results obtained indicate a time-varying dependence structure with statistically significant tail dependence coefficients supporting the existence of credit risk contagion effects. Goodness-of-fit tests are used to indicate which model is closest to the true conditional copula. Our findings provide further evidence supporting the interconnectivity of credit risk between corporates and financial institutions operating on the European market.     

Overcoming failure in infrastructure risk governance implementation: large dams journey

There is ample recognition of the risk inherent in our very existence and modes of social organization, with a reasonable expectation that implementing risk governance will result in enhanced resilience as a society. Despite this, risk governance is not a mainstream approach in the infrastructure sector, regardless of the increasing number of peer-reviewed published conceptualizations, mature procedures to support its application, or public calls to cope with systemic risks in our modern societies. This paper aims to offer a different view on the issue of risk governance, with focus in the analysis of the root causes of its relatively low degree of implementation in the infrastructure sector. We later analyze the impact of such essential causes, which we have grouped and labeled as the ontology, the concerns, the anathemas, and the forgotten, in the specific field of large dams. Finally, we describe the journey toward risk governance in the specific field of large dams, thus supporting the ultimate objective of this paper to facilitate an evidence-based approach to successful risk governance implementation within and outside the dam sector.     

系统性金融风险研究综述

自2008年全球金融危机以来,风险管理与风险控制受到更普遍的关注和重视。本文综述了近几年系统性金融风险的成因、测度及防范监管对策3个方面的现状及进展。     

系统重要性金融机构:国际监管实践与中国金融改革

运用文献法和比较分析法，研究梳理金融稳定委员会、巴塞尔银行监管委员会等机构发布的系统重要性金融机构监管的相关文件，分析与评估了当前全球系统重要性金融机构的评估方法和监管政策。同时，参考美国、英国、澳大利亚以及荷兰在2008年次贷危机后的金融监管改革措施以及系统重要性金融机构监管制度的设计，结合中国目前系统重要性金融机构监管的进展以及金融监管的形势，指出中国应改变现有的"一行三会"监管模式，采取"央行+微观审慎监管局+金融行为监管局"监管模式。     

“Interest Rate Trap”, or Why Does the Central Bank Keep the Policy Rate Too Low for Too Long?

In this paper, we provide a framework for modeling one risk‐taking channel of monetary policy, the mechanism whereby financial intermediaries' incentives for liquidity transformation are affected by the central bank's reaction to a financial crisis. The anticipation of the central bank's reaction to liquidity stress gives banks incentives to invest in excessive liquidity transformation, triggering an “interest rate trap” – the economy will remain stuck in a long‐lasting period of suboptimal, low interest rate equilibrium. We demonstrate that interest rate policy as a financial stabilizer is dynamically inconsistent, and the constrained efficient outcome can be implemented by imposing ex ante liquidity requirements.     

Systemic Risk in the Chinese Shadow Banking System: A Sector-Level Perspective

We propose to measure the systemic risk in the shadow banking sector. Instead of testing how many institutions will fail due to the initial breakdown of one institution as extant network models do, we associate the systemic risk of one shadow banking sector with the total amount of unexpected losses it might generate both directly and indirectly. Our model focuses on balance sheet contagion and applies a loop algorithm to risk transfer. The result shows that trust companies were the main culprit of financial instability and commercial banks assumed the main risks over 2007–12 in the Chinese shadow banking system.     

Between bricolage and breakthroughs—framing the many faces of public sector innovation

Public sector innovation is often seen through the lens of private sector frameworks. This paper discusses to what extent the innovation typology derived from the private sector is appropriate for public sector contexts. Based on a discretionary classification of 1,536 qualitative examples of public sector innovations, the authors examine the nuances of change spanning from learning and incremental change to radical and systemic innovation. Measurement frameworks should better reflect the heterogeneity of learning and innovation in the public sector.