Management

Systemic Risk

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The global financial crisis has brought home to many—particularly in the central banking community—the urgent need for a substantial reassessment of the fundamental workings of financial systems, their interactions with the real economy, and the circumstances that tip such systems from stability to instability. The crisis revealed how rapid financial innovation during an era of prolonged macroeconomic stability had resulted in a highly complex and interconnected system that was inadequately understood by regulators. The derisory investment over the years by central banks in analytical tools for financial stability analysis was also cruelly exposed, as policymakers realized that their existing macroeconomic models were incapable of characterizing the abrupt non-linear adjustments and spillover effects being witnessed at the system level.
In his call for new thinking on financial stability, Trichet (2011) belatedly recognizes these failings, noting how ‘the combination of complexity, inter- connectedness, payments promises in debt contracts, limits of information and basic human behaviour—“animal spirits”—can lead to the violent feed- back and amplification mechanisms that are so typical for the transition from stability to instability’.

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Detail Information

Series Title

Systemic Risk

Call Number

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Publisher

New York : Oxford University Press Inc., 2013

Collation

1-147

Language

English

ISBN/ISSN

978–0–19–954449–3

Classification

NONE

Content Type

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Media Type

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Carrier Type

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Edition

1st Edtion

Subject(s)

Management

Specific Detail Info

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Statement of Responsibility

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