Keep it simple: Policy Responses to the Financial Crisis

With the aim of restoring a strong global 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.

It also advocates stricter prudential rules for banks, centred around the introduction of a simple leverage ratio calculated with reference to total assets, with no exemptions or risk mitigation. The authors warn against the risk of a massive wave of new regulation, which is not needed and might cripple capital markets for years, and call instead for a simplification and a better enforcement of rules.