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CIAO Focus, August 2010: Global Financial Reform

“The worst of the global financial crisis (GFC) is over, but it has left scars, principally in the form of fiscally driven debt increases, balance sheets that still need repair and high unemployment in the principal crisis countries.  There is also unfinished business from the pre crisis period, in the form of external imbalances. More positively, the crisis offers lessons about economic policymaking that may improve the way things are done. Of course the main lessons are for the developed countries that were at the centre of the crisis. But the countries of the region had to cope with the backwash, and in doing so lessons were learned. In addition, the lessons in the crisis countries, learned in an environment of extreme stress, may have relevance for the emerging market economies of this region.

…Banks found new and innovative ways to make old mistakes: over-leverage, borrowing short and lending long, over-optimism about asset values and lending to people who couldn’t repay. With these mistakes common to the major mature countries (notably the US and the UK) the agglomeration of errors was large enough to create substantial collateral damage along the global linkages, via falls in exports and capital flows. That the globalised world spreads problems as well as benefits is not news, and increased globalization meant stronger linkages. Yet strong policy response in the region offset much of this knock-on effect with perhaps surprising success.” 

Stephen Grenville
Lowy Institute for International Policy


From the CIAO Database:

Would a Stricter Fed Policy and Financial Regulation Have Averted the Financial Crisis?

Comparing EU and US Responses to the Financial Crisis

The evolving post-crisis world

The Realities and Relevance of Japan's Great Recession: Neither Ran nor Rashomon

Higher Taxes on Multinationals Would Hurt US Workers and Exports


Outside Sources: *

Reforming the Global Financial System (Financial Times)

Dodd-Frank Wall Street Reform and Consumer Protection Act: Conference Report

Financial Regulatory Reform: A New Foundation (U.S. Dept. of the Treasury)

The Basel Committee on Banking Supervision

Global financial reform: What are its Mideast implications? (Daily Star)

Lessons of the Financial Crisis for Future Regulation of Financial Institutions and Markets and for Liquidity Management (IMF)

Analyzing the Crisis and its Aftermath (IMF)

Europe and Central Asia - Overview (World Bank),,menuPK:258606~pagePK:146732~piPK:64003010~theSitePK:258599,00.html

* Outside links are not maintained. For broken outside links, CIAO recommends the Way Back Machine.