Regulation and Sausages

26 Pages Posted: 25 Aug 2015

See all articles by Douglas M. Gale

Douglas M. Gale

New York University (NYU) - Department of Economics

Date Written: December 2015


The experience of market disruption during the recent financial crisis has focused attention on the requirements for increasing the resilience of financial markets. Theoretical research has provided new insights into the sources of ‘market freezes’. These models offer new explanations for the sudden drying up of liquidity in terms of adverse selection, ambiguity aversion, coordination failure, hoarding and market manipulation. The challenge is to make use of these insights to help design better regulatory frameworks and improve the structure of the financial system.

Suggested Citation

Gale, Douglas M., Regulation and Sausages (December 2015). The Manchester School, Vol. 83, pp. 1-26, 2015. Available at SSRN: or

Douglas M. Gale (Contact Author)

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
(212) 998-8944 (Phone)
(212) 995-3932 (Fax)

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