Can Tight and Centralized Financial Regulations Prevent Financial Crises? Effects of Financial Regulations on Monetary Policy

Eurozone and Its Neighbors: The Third Year of Crisis, Bučovice: Martin Stříž Publishing, 2012

13 Pages Posted: 15 Nov 2012 Last revised: 12 Dec 2012

See all articles by Tomáš Otáhal

Tomáš Otáhal

Mendel University - Faculty of Economics and Business Administration

Václav Rybáček

Czech Statistical Office

Date Written: November 14, 2012

Abstract

Can tight and centralized financial regulations prevent financial crises? Governments usually respond to financial crises with tightening and centralizing financial regulations. In this paper, we explore the historical parallels between the governmental responses to the financial crises at the end of the 19th and the beginning of the 20th century in the USA and the recent response of the European Union. Our rent-seeking model with endogenous rent derived from the historical narrative predicts that tight and centralized financial regulations might increase the risk of inflationary monetary policy.

Keywords: Federal Reserve System, financial crises, financial regulation, interest groups, rent-seeking, US monetary history

JEL Classification: G01, G18, G28, N11, N21, N41

Suggested Citation

Otáhal, Tomáš and Rybáček, Václav, Can Tight and Centralized Financial Regulations Prevent Financial Crises? Effects of Financial Regulations on Monetary Policy (November 14, 2012). Eurozone and Its Neighbors: The Third Year of Crisis, Bučovice: Martin Stříž Publishing, 2012, Available at SSRN: https://ssrn.com/abstract=2175742 or http://dx.doi.org/10.2139/ssrn.2175742

Tomáš Otáhal (Contact Author)

Mendel University - Faculty of Economics and Business Administration ( email )

Staňkova 578/16b
Brno, 602 00
Czech Republic

Václav Rybáček

Czech Statistical Office ( email )

Na padesatem 81
Praha, 10000
Czech Republic

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