Abstract

In the context of current debates about the proper form of prudential regulation and proposals for the imposition of liquidity and capital ratios, the paper examines Hyman Minsky’s work as a consultant to government agencies exploring financial regulatory reform in the 1960s. As the author explains, this often-overlooked early work, a precursor to Minsky’s “financial instability hypothesis”, serves as yet another useful guide to explaining why regulation and supervision in the lead-up to the 2008 financial crisis were flawed, and why the approach to reregulation after the crisis has been incomplete. KEYWORDS : Banking supervision, Macroprudential Regulation, Financial instability hypothesis (FIH) JEL CODES : G21, G01, G28

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