In this paper, we present two stylized models of the financial system. We make the case that in order to realize the potential of a well-functioning complete financial market, financial system designers and financial service providers will need to think about ways to deliver financial...

This paper presents a proposal for a regulatory regime aimed at reducing systemic risk effectively and internationally. Systemic relevance should be internalized with a levy (or "tax"), the level of which (or "tax rate") rises with the systemic relevance of an institution (Pigouvian taxation)....

In this paper, we present two stylized models of the financial system. We make the case that in order to realize the potential of a well-functioning complete financial market, financial system designers and financial service providers will need to think about ways to deliver financial...

Following every major financial debacle (of which we now have had three in the span of a decade – the Asian crisis, the dot-com bubble, and the subprime crisis), all the parties that bear some responsibility for the soundness of financial institutions come under scrutiny – the managers (and...

A common distinction in political economy contrasts the dynamics of free markets with the ‘political’ dynamics of governance. That distinction portrays ‘economic’ competition as separate from the deployment of private political resources to affect the terms of competition in line with...

We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead...

This survey reviews the literature on the political economy of financial structure, broadly defined to include the size of capital markets and banking systems as well as the distribution of access to external finance across firms.The theoretical literature on the institutional basis for...

Being active in both the insurance sector and the banking sector, financial conglomerates intrinsically increase the interconnections between the banking sector and the insurance sector. We address two main concerns about financial conglomerates using a unique database on bilateral exposures...

The growing popularity of fintechs has led the Financial Stability Board (FSB) to publish considerations about the effects of this emerging industry on stability and efficiency in the financial sector. Against this background, this paper compares the effects of competition and collaboration...