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  Measuring and Mitigating Systemic Risks: How the Forging of New Alliances between Central Bank and Academic Economists Legitimize the Transnational Macroprudential Agenda

Thiemann, M., Melches, C. R., & Ibrocevic, E. (2020). Measuring and Mitigating Systemic Risks: How the Forging of New Alliances between Central Bank and Academic Economists Legitimize the Transnational Macroprudential Agenda. Review of International Political Economy, (published online June 30). doi:10.1080/09692290.2020.1779780.

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 Creators:
Thiemann, Matthias1, Author
Melches, Carolina Raquél2, Author
Ibrocevic, Edin3, Author           
Affiliations:
1Sciences Po, Paris, France, ou_persistent22              
2German Bundestag, Berlin, Germany, ou_persistent22              
3International Max Planck Research School on the Social and Political Constitution of the Economy, MPI for the Study of Societies, Max Planck Society, ou_1214550              

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Free keywords: G-SIFI, macroprudential regulation, regulatory science, central banks, systemic risk, epistemic alliances
 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.

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Language(s): eng - English
 Dates: 2020-06-30
 Publication Status: Published online
 Pages: 26
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 Table of Contents: Introduction
The role of economic ideas within pre- and post-crisis financial regulation
Shifting alliances of academic and applied economics
Dataset and method
Analysis of risk modeling and measurement discourse
Interaction between academic and applied approaches and their translation into CoVaR, MES and SRISK
Discussion and conclusion: the professional origins of systemic risk measures and their usability for systemic risk monitoring
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 Identifiers: DOI: 10.1080/09692290.2020.1779780
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Title: Review of International Political Economy
Source Genre: Journal
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Pages: - Volume / Issue: (published online June 30) Sequence Number: - Start / End Page: - Identifier: ISSN: 0969-2290
ISSN: 1466-4526