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Understanding the shift from micro- to macro-prudential thinking: a discursive network analysis

Author

Listed:
  • Matthias Thiemann

    (CEE - Centre d'études européennes et de politique comparée (Sciences Po, CNRS) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Mohamed Aldegwy
  • Edin Ibrocevic

Abstract

Macro-prudential thinking and its emphasis on endogenously created systemic risks, marginal in the banking regulation discourse until the mid-2000s, has become central post-crisis. This paper analyzes this intellectual shift by using discourse and citation-network analysis of the most-cited scholarly works on banking regulation and systemic risk from 1985 to 2014 and six in-depth interviews with central scholars. It demonstrates that the predominance of formalism, particularly partial equilibrium analysis, in studies on banking regulation pre-crisis impeded economists' engagement with the endogenous sources of systemic risks discussed in the systemic risk sample. These studies excluded observed phenomena that could not be accommodated in mathematical models, largely ignoring contributions based on historical and practitioners' styles of reasoning. Post-crisis, while informal analyses gain prominence in studies on banking regulation, attempts to conceptualize systemic risk as a negative externality indicate the persistence of formalism and equilibrium thinking and its concomitant epistemological limitations that stymie theoretical progress.

Suggested Citation

  • Matthias Thiemann & Mohamed Aldegwy & Edin Ibrocevic, 2017. "Understanding the shift from micro- to macro-prudential thinking: a discursive network analysis," Post-Print hal-02184169, HAL.
    • Handle: RePEc:hal:journl:hal-02184169
    DOI: 10.1093/cje/bex056
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    Citations

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    Cited by:

    1. Ibrocevic, Edin & Thiemann, Matthias, 2018. "All economic ideas are equal, but some are more equal than others: A differentiated perspective on macroprudential ideas and their implementation," SAFE Working Paper Series 214, Leibniz Institute for Financial Research SAFE.
    2. Romain Plassard, 2020. "Making a Breach: The Incorporation of Agent-Based Models into the Bank of England's Toolkit," GREDEG Working Papers 2020-30, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    3. Brancaccio, Emiliano & Giammetti, Raffaele & Lopreite, Milena & Puliga, Michelangelo, 2019. "Monetary policy, crisis and capital centralization in corporate ownership and control networks: A B-Var analysis," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 55-66.

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