Former central banker Paul Tucker is the chair of the Systemic Risk Council, a Fellow at the Harvard Kennedy School, and author of Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State. 


Macroprudential Policy and the International Monetary System: Triangulation or Strangulation

The 2007/08 financial and economic crisis prompted a large and obviously overdue overhaul of an international economic system that had proved fatally frail. The official sector set up two programmes. One, entrusted to the Financial Stability Board, was to overhaul the rules of the game for the financial system itself. It is international insofar as the aim has been to apply a shared framework to countries’ regulatory systems — in particular, for banking — so that they cater for internationally active firms and global markets.

Office of Financial Research and Financial Stability Oversight Council Conference

Paul Tucker, Harvard Kennedy School and Harvard Business School

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The other was to reform the International Monetary System (IMS) itself, whose flaws had led to unsustainable global macroeconomic imbalances. In the real world, the two sets of problems were linked. The drivers of global current account imbalances had also led to a compression of global real interest rates and an associated appreciation in asset values, which provided the collateral that helped fuel the credit boom in the West. And when the US subprime bubble burst, contagious infection via capital markets spread the damage globally, irrespective of current account positions. My thanks to Kristin Forbes (MIT) and Gita Gopinath (Harvard) for conversations prior to writing this; to Dietrich Domanski