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Imperfect Alternatives: Networks, Salience, and Institutional Design in Financial Crises


Robert B. Ahdieh


Emory University School of Law

October 17, 2011

University of Cincinnati Law Review, Vol. 79, 2011
Emory Legal Studies Research Paper No. 12-212

Abstract:     
With the benefit of hindsight — and some aspiration to foresight — it is useful to consider the type of regulatory regime that might best address financial crises. What could policymakers have done to prevent the recent crisis? And once the crisis started, what interventions might have alleviated it? These questions have been widely debated, with an eye to both substantive policy and the design of effective regulatory institutions. This Article speaks to the latter project — one of comparative institutional analysis — though with a framework that implicates our substantive policy choices as well. It begins with an account of financial crises as grounded in the multiple equilibrium character of the financial markets. Given the latter, it suggests, questions of “salience” become central to the design of both substantive policy and relevant institutions. To emphasize as much, the Article considers the role of transnational regulatory networks in preventing and responding to financial crises. Drawing on the example of the recently re-formed Financial Stability Board, it highlights certain inherent limits of networks, but also points to institutional reforms that might be expected to enhance their capacity to impact salience — and thereby play a role — in regulating financial crises.

Number of Pages in PDF File: 27

Keywords: financial crisis, coordination, network externalities, salience, focal points, institutional design, Financial Stability Board

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Date posted: July 9, 2012 ; Last revised: September 24, 2012

Suggested Citation

Ahdieh, Robert B., Imperfect Alternatives: Networks, Salience, and Institutional Design in Financial Crises (October 17, 2011). University of Cincinnati Law Review, Vol. 79, 2011; Emory Legal Studies Research Paper No. 12-212. Available at SSRN: http://ssrn.com/abstract=2102359

Contact Information

Robert B. Ahdieh (Contact Author)
Emory University School of Law ( email )
1301 Clifton Road
Atlanta, GA 30322
United States
404-727-4924 (Phone)
404-727-6820 (Fax)

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