A tax on systemically risky transactions could reshape financial networks into a new structure that is less vulnerable to cascading
financial system shocks such as the 2008 financial crisis, according to new IIASA research published in the Journal of Economic Dynamics and Control.
Although headline - grabbing days induce fear, in reality last week's events left markets close to their mid-June levels, with investors taking prices down in a way consistent with political shocks as opposed to
financial system shocks.
Not exact matches
The government would also have less ability to respond swiftly and strongly in the event of a
shock to the
financial system.
This would create a
shock throughout the global
financial system.
I would encourage you to remember that the current low levels of interest rates, while in the first instance a reflection of the Federal Reserve's monetary policy, are in a larger sense the result of the recent
financial crisis, the worst
shock to this nation's
financial system since the 1930s.
The prospect of the first major default connected with the Chinese shadow banking
system sent
shock waves through the
financial markets of emerging economies.
If the external
shocks seemed to pose
financial stability risks, macroprudential measures might be introduced as a complement or backstop to existing regulations and oversight of domestic
financial systems.
Those countries with less - developed institutions and
financial systems, limited policy credibility, greater foreign currency debt and / or more precarious economic situations are certainly more exposed than others to external
shocks.
In the presence of such vulnerabilities, an event such as an adverse macroeconomic
shock can stress the
financial system or even trigger a crisis.
To conclude, over the past decade and in a very volatile world, Australia has achieved the inflation target, avoided a major economic downturn, seen remarkably little variability in real economic activity in the face of enormous
shocks, experienced a fairly low average rate of unemployment, and had a stable
financial system as well.
Probably after there is a
financial shock to the
system that reverses market mania.
But we have tried to make our banking
system and our
financial system more resilient so that no matter what kind of
shock might hit, our banking
system is today much better able to weather it than it was eight years ago.
All it would take is a fresh
shock to the
financial system.)
The
financial system is working on creating a
shock - proof economic structure that will not be highly dependent on global economic indicators.
On the whole, the bank says the risks of a major
shock to the country's
financial system haven't gotten worse in the six months since the bank's last report.
Its focus on short - term gains means too much money funds unsustainable activities, power is concentrated in a few institutions making the
system vulnerable to
shocks, and there is little focus on new
financial models which will support the transition to a sustainable economy.
And the highly - destructive hurricanes that struck the United States this year are a real - world reminder that risk spreading via reinsurance in some form makes the
financial system more resilient even in the face of unthinkably - severe
shocks.»
* On an overall basis, the report states that while «global tail risks have diminished (meaning the risk of a systemic
shock to the global
financial system that could be caused by an event like a sovereign debt default), the global outlook is slightly weaker than projected in October».