FINANCIAL SECTOR DISTRESS AND POLICYMAKING
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Date
2008-06-06T19:19:09Z
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Johns Hopkins University
Abstract
The purpose of this thesis is to attempt to determine how policymakers should respond to
incidents of financial crisis. It finds that during such times policymakers are faced with
two critical tasks. These are to identify and appropriately address the issues critical to the
crisis and secondly to ensure the sector reaches a new equilibrium. It finds the first task to
be important given the resource constraints of policymakers and distinguishes it from
addressing the causes of the crisis. The thesis also suggests that to address the second task
it is important the policymakers understand three fundamental pillars of financial sector
stability and development. The importance and precise nature of these tasks are
illustrated using evidence from the Asian Financial Crisis and the U.S. Savings and
Loans Crisis. In addition to identifying these tasks, the thesis proposes policymaking
frameworks to address each of the identified tasks. These frameworks are developed from
a critical reading of the relevant literature and a study of the cases reviewed.