Financial Instability, Monetary Policy and Regulation: A Primer

Abstract:     
In our lectures we tried to shed light on the basic role of both monetary policy and financial regulation as drivers of the financial instability which characterized the years 2008-2009. We illustrated how a relatively limited default event – the subprime loan crisis in the United States – has domino effects on the overall world financial industry. In these notes we summarize our interpretation, presenting a very simple and teachable framework to address the macro relationship between default events, micro and macro drivers, regulatory amplification mechanisms and financial instability.

Number of Pages in PDF File: 5

working papers series