also grateful to Ernesto Stein for very useful collaboration in the early stages of this project and to

Nearly two years after the outbreak of the credit crisis (which may be dated to March 2007 when major losses were announced by the U.S. subprime-based investors Accredited Home Lenders Holding and New Century Financial), key issues remain to be resolved. At the most basic level the questions are two. What caused the crisis? And in light of ones answer to this first question, what should be done to minimize the risk of repetition if not of identical events then at least of something similar? To say that these questions remain to be satisfactorily answered is not the same as saying that there has been a shortage of attempts. Standard operating procedure starts by rounding up the usual suspects: unethical mortgage brokers, greedy bankers, naïve homeowners, and ill-informed investors. Lists focusing less on individuals than mechanisms emphasize agency problems between brokers and banks, the originate-and-distribute model, excessive leverage and short-term funding, the perverse incentives created by executive compensation practices, conflicts of interest within the rating agencies, and permissive monetary policies. These long lists of causes lead to correspondingly long lists of reforms: regulate mortgage brokers, rating agencies, and executive compensation; force banks to keep a participation in any securities they

This folder includes the replication package for the manuscript titled "The Political Scar of Epidemics". Please refer to the read-me file for details regarding the replication package.

Using hand-collected data spanning more than a decade on European banks' sovereign debt portfolios, we show that the trust of residents of a bank's countries of operation in the residents of a potential target country of investment has a positive, statistically significant, and economically important effect on its cross-border exposures.In identifying cultural stereotypes at the bank level, we show that corporate culture at bank headquarters is influenced by foreign subsidiaries for several reasons, including banks' tendency to hire internally across borders for high-level managerial positions.We therefore leverage the geography of multinational bank branch networks to construct a bank-specific measure of culture that varies across banks headquartered in the same country, at the same point in time, with regard to the same target country.We find stereotypes and their effect on bank exposures to be persistent over time, stronger for less diversified banks, and weaker for target countries whose bonds appear more frequently in bank portfolios.Cultural stereotypes are particularly salient when governments are hit by sovereign debt crises.

This paper offers some reflections on the debate over secular stagnation. It expresses doubts about explanations for the secular decline in real interest rates and economic growth rates that emphasize the possibility of a global savings glut attributable to the rapid growth of emerging markets and increases in income inequality in the advanced economies. It invokes historical evidence to question whether the commercial potential of new advances in technology have been exhausted. The most convincing explanation for the observed excess of desired saving over desired investment and corresponding low level of real interest rates, it concludes, is probably a sharp, ongoing fall in the relative price of investment goods since the middle of the 20th century. Whether this decline will continue is uncertain. The bottom line is that the case for secular stagnation is at best unproven.

his report was written by the Committee on International Economic Policy and Reform, a non-partisan, independent group of experts, comprised of academics and former government and central bank officials. Its objective is to analyze global monetary and financial problems, offer systematic analysis, and advance reform ideas. The committee attempts to identify areas in which the global economic architecture should be strengthened and recommend solutions intended to reconcile national interests with broader global interests. Through its reports, it seeks to foster public understanding of key issues in global economic management and economic governance. Each committee report will focus on a specific topic and will emphasize longer-term rather than conjunctural policy issues. In this September 2012 report, the committee lays out a framework for cross-border banking flows and for improved regulatory coordination.

The fact that resolving the crisis will be costly has one silver lining. It concentrates attention on the need to reform the institutions of the euro area to prevent equally costly crises from occurring again.

An abstract is not available for this content so a preview has been provided. Please use the Get access link above for information on how to access this content.