Macroeconomic Stability, Bank Soundness, and Designing Optimum Regulatory Structures

31 Pages Posted: 1 Jul 2015

Date Written: June 30, 2015

Abstract

This paper focuses on the strong links between macroeconomic stability and bank soundness and argues that if the first is not achieved the second is not likely either with serious adverse consequences. Instability in banking is most often the result of actions by governments directed at the macroeconomy and banks to achieve short-run goals with little consideration for unintended immediate or longer-term consequences. Without government interference, there is little evidence that the banking system is unstable. This paper develops a framework for designing optimum regulatory structures that, if adopted by countries, will help to reduce instability in their banking systems and thereby also in their macroeconomies.

Keywords: macroeconomic stability; bank soundness; designing optimum regulatory structures

JEL Classification: E44, G21,G28

Suggested Citation

Kaufman, George G., Macroeconomic Stability, Bank Soundness, and Designing Optimum Regulatory Structures (June 30, 2015). Multinational Finance Journal, Vol. 8, No. 3/4, p. 141-171, 2004, Available at SSRN: https://ssrn.com/abstract=2625114

George G. Kaufman (Contact Author)

Loyola University Chicago ( email )

820 North Michigan Avenue
School of Business
Chicago, IL 60611
United States
312-915-7075 (Phone)
312-915-8508 (Fax)

HOME PAGE: http://www.luc.edu/faculty/gkaufma/

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