Department of Computational Social Science Seminar Abstract

Friday, December 16 - 3:00 p.m.
Center for Social Complexity Suite
Third Floor, Research Hall

Title: The Global Financial System of the Future: Better or Worse and How Can We Tell

Laura Ellen Kodres, PhD
Division Chief, Global Financial Stability Division
Monetary and Capital Markets Department
International Monetary Fund (IMF)

Abstract: The recent (and continuing) financial crisis has set in motion a barrage of re-regulation. A new emphasis on mitigating systemic risks through the use of “macroprudential,” as opposed to “microprudential” policies is gaining traction. While the intended goal is not always articulated, the notion appears to be to dampen excessive credit cycles and arrest the knock-on effects of financial institution failures. An important component of assessing whether the new regulations or macroprudential tools work is to assess whether the global financial system is more stable and less subject coincident bouts of financial institution insolvency and/or illiquidity. But what is the counterfactual? How will we able to tell whether the tools are effective? This discussion will highlight some of the open issues about how to evaluate the effectiveness of policy solutions being put forward, drawing attention to areas where there need to be improvements in the techniques to do so.