Keep It Simple: Policy Responses to the Financial Crisis

by Carmine Di Noia, Stefano Micossi, Jacopo Carmassi (Contributor)

How can the world avoid repetition of the catastrophic financial instability currently plaguing the global economy? With the aim of restoring a strong framework for economic governance, this study proposes new rules of the game —imposed through the Group of 20 and the IMF —for the macroeconomic and exchange rate policies of the main players, including the United States. The authors advocate stricter prudential rules for banks, centered around the introduction of a simple leverage ratio calculated with reference to total assets, with no exemptions or risk mitigation. The book warns against the risk of a massive wave of new regulation that is not needed and might cripple capital markets for years, calling instead for a simplification and a better enforcement of rules. In short, the message, as reflected in the title, "Keep it simple."

96 pages, Paperback

First published July 14, 2009