A breakfast debate, jointly organised by EIFR and Labex ReFI, which aims to bring together academics, finance industry professionals and political actors to discuss the subject of financial regulation.
Financial markets have historically been regulated. This regulation is often motivated by the desire to discourage speculation and to limit negative externalities, where the behavior of an individual investor or institution can destabilize the financial market as a whole. The recent financial crisis, which has highlighted the negative feedback from financial markets to the real sector, has intensified the debate about the ability of financial-market regulations to stabilize financial markets and improve macroeconomic outcomes. In this research, we study the intended and unintended consequences of various regulatory measures used to reduce fluctuations in financial as well as real markets and to improve welfare. The measures we study are the ones that have been proposed by regulators in response to the financial crisis: the financial-transactions tax, short-sale constraints, and borrowing constraints. Based on those illustrative cases the research objectives is to minimize the risk of unintended consequences of regulations.iques and benchmark practices to research advances.
This research is supported by the Fédération Bancaire Française (FBF) as part of the research chair at EDHEC-Risk Institute on “Innovations and Regulations in Investment Banking”. This chair is providing advanced research in four areas: skewness as an asset class; corporate and sovereign credit default swap (CDS) markets; the evaluation of policies to regulate financial markets; and options on liquidity.
Raman Uppal, Professor of Finance at EDHEC Business School