Measuring Regulatory Complexity
89 Pages Posted: 24 Jan 2020 Last revised: 23 Mar 2023
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Measuring Regulatory Complexity
Measuring Regulatory Complexity
Date Written: March 15, 2023
Abstract
Despite a heated debate on the complexity of financial regulation, a comprehensive framework to study regulatory complexity is lacking. We propose one inspired by the analysis of algorithmic complexity in computer science. We use this framework to distinguish different dimensions of complexity, classify existing measures, develop new ones, compute them on two examples - Basel I and the Dodd-Frank Act - and validate them using novel experiments. Our framework offers a quantitative approach to the policy trade-off between regulatory complexity and precision. Our toolkit is freely available and allows researchers to measure the complexity of any normative text and test alternative measures.
Keywords: Financial Regulation, Capital Regulation, Regulatory Complexity, Basel Accords
JEL Classification: G18, G28, G41
Suggested Citation: Suggested Citation