Krisenbewältigung und Krisenvermeidung: Lehren aus der Finanzkrise / Crisis resolution and future crisis prevention: lessons from the recent financial crisis

Pohl Rüdiger

ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, 2009, vol. 60, issue 1, 289-316

Abstract: The purpose of this paper is to draw some early lessons from the recent financial crisis, particularly with regard to the crisis resolution and the prevention of future crises. In order to stabilize the financial system, government activities are essential even though success is uncertain. Nevertheless, there is rising concern of possible negative side effects such as a softening of the government’s budget constraint caused by government activities or distortions of competition in the financial sector. The reduction of these side effects remains a main challenge for the government. The judging of the government in the future will jointly depend on the dealing with crisis resolution and the causing or rather prevention of negative side effects. Due to the enormous output loss caused by the financial crisis, crisis prevention is gaining a high priority. However, thinking that the possibility of future financial turmoil can be eliminated by implementing new regulation frameworks is not realistic. The reason is that risk as a crisis potential is inseparably involved in financial transactions. Phenomena such as a declining risk awareness and a widespread herd instinct, which have caused the unsustainable accumulation of risks in the current crisis in the first place, will still be at work in the future. This cannot be completely suppressed by regulating the financial markets. Even a more ambitious regulation of the financial system, which is on the way as a reaction to the crisis, must give room for risk taking, otherwise it would undermine the efficiency of the allocation of capital.

Date: 2009
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DOI: 10.1515/ordo-2009-0115

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