WHO SHOULD REGULATE FINANCIAL INSTITUTIONS?

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By this: publisher
In this Subject: Economics
By this author: Booth P.

Author: Booth P.

Source: Economic Affairs, Volume 23, Number 3, September 2003 , pp. 28-34(7)

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Abstract:

Financial market transactions involve complex decisions and significant amounts of information have to be processed by consumers. Economists often call for statutory regulation to overcome so-called ‘information asymmetries.’ However, the market will generally develop sophisticated institutions that are able to deal with such problems in financial markets. It is important that regulators do not impede the development of such institutions. The liberal market structure may not look like the market structures in many textbook models of so-called ‘perfect’ markets. However, the structure may well be efficient and welfare enhancing.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/1468-0270.00427

Publication date: 2003-09-01