Measuring and mitigating systemic risks: how the forging of new alliances between central bank and academic economists legitimize the transnational macroprudential agenda

Matthias Thiemann (matthias.thiemann@sciencespo.fr), Carolina Raquel Melches and Edin Ibrocevic
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Matthias Thiemann: CEE - Centre d'études européennes et de politique comparée (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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Abstract: After the great financial crisis of 2007–2009, central banks were handed a macroprudential mandate to contain systemic risks, a mandate seen as endangering their independence due to expected distributional conflicts. At the same time, depoliticization through scientific expertise was largely foreclosed, as systemic risk was a largely undefined concept. This paper focuses on how central banks dealt with this conundrum. It examines the scientific debate on systemic risk and macroprudential regulation post-crisis, focusing on the debate's impact on final regulation. Employing author-topic-modeling on a unique dataset of 2397 published economic papers on the relevant topics, we detect the formation of a new alliance between central bankers and academic economists working jointly on developing systemic risk measures. Centered around a hinge of systemic risk contribution by individual banks, this new alliance expresses itself by incorporating the macroprudential concerns of practitioners into abstract market-based systemic risk measures. These measures develop incrementally, using and repurposing techniques from financial economics pre-crisis to legitimize and justify macroprudential interventions post-crisis. This alliance allows us to account for the incremental change witnessed post-crisis and point to its potential for long-term fundamental change.

Keywords: G-SIFI; macroprudential regulation; regulatory science; central banks; systemic risk; epistemic alliances (search for similar items in EconPapers)
Date: 2020-06
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Published in Review of International Political Economy, 2020, 28 (6), pp.1433-1458. ⟨10.1080/09692290.2020.1779780⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-02934916

DOI: 10.1080/09692290.2020.1779780

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