FINANCIAL CRISES AND THE DESIRE FOR MACROPRUDENTIAL POLICY

Crisis

Nowadays, a crisis is one of the most intimidating words for the Western world and preventing one can be the major dream for a macroeconomist. What if one answer to this problem lies on banks’ equity and the government intervention? There seems to be a relation between crisis and elevated credit spreads which occur when banks’ equity is low. High equity level seems to be a positive externality. What about internalizing this consolidation via subsidies?

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