Coping with Systemic Risk
Editor: Sheri Markose, University of Essex
Retaining the objectives of the 2011 Global Economic Symposium Panel on Coping with Systemic Risk, the Special Issue invites contributions that are prepared to 'think outside the box' in terms of providing solutions to monitoring and managing systemic risk. On taking a distinct view that systemic risk from excessive leverage is a negative externality analogous to environmental pollution, long term regulatory and institutional solutions are those that mitigate the misalignment between incentives at the individual level and system-wide stability. Financial or macro-economic instability come from excessive supply of private and/or public debt with both of them having a monetary counterpart. Without natural constraints on IOUs, except the willingness of counterparties to hold them, history is replete with attempts to place external constraints on money supply and debt. We are relearning that systemic risk in monetary and financial systems is inherent to a fractional monetary system, in which innovation-driven private credit creation is one for which tax payer is liable and central banks remain responsible.
In the Special Issue, we invite papers that address both foundational and operationally relevant aspects relating to the following topics:
- How to measure the systemic risk in a financial system?
- Upgrades to macro-financial models to include financial instability.
- New holistic visualization financial network tools to identify and measure systemic risk for financial institutions and markets.
- How to combine micro- and macro-prudential regulation efficiently?
- Design of a financial stability fund based on a capital surcharge or tax on financial intermediaries for their systemic risk contributions.
- Can a 'cap and trade' system for leverage work better?
- Can a generic capital surcharge for being SIFI (Systemically Important Financial Intermediary) work to curtail moral hazard?
- How can regulation avoid perverse incentives that lead to systemic risk?
- Rethinking fractional monetary system.
- A digital registry of assets and liabilities, containing on and off balance-sheet data.