Lacunae in Financial Regulatory Framework vis-Ã -vis Financial Repression

Gurbachan Singh
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Gurbachan Singh: Gurbachan Singh is Associate Professor, Jawaharlal Nehru University (JNU), New Delhi, India. E-mail: gbsingh@mail.jnu.ac.in

Review of Market Integration, 2009, vol. 1, issue 2, 137-170

Abstract: This paper makes four points. First , it introduces a new ‘academic’ concept—optimal noise in financial markets. Second , it suggests that the government intervenes to take care of the problem of ‘free ride’ in financial markets. Third , it suggests regulation of entry into the finance profession, whose tasks would include ‘prescribing’ a portfolio choice for (financially) uninformed investors. Fourth , given that deposit insurance, lender of last resort, capital adequacy and supervision of banks are in place, there is no need to impose the following beyond reasonable prudential norms: (a) cash reserve ratio requirement, (b) statutory liquidity ratio requirement and (c) barriers to entry.

Keywords: Financial repression; under-regulation; optimal noise; free ride; behavioural finance; complex products; regulation of entry (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:sae:revmar:v:1:y:2009:i:2:p:137-170

DOI: 10.1177/097492920900100203

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