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International financial crises: new understandings, new data

Author(s): Jaime Caruana

Date published: Sep 2017

This anthology traces the trajectory of a remarkable career, from economist and banker, to manager at the oldest and the newest international organisations. Alexandre Lamfalussy championed better understanding of global financial vulnerabilities, better data collection to inform that understanding and, more generally, the macroprudential approach.

In my remarks today, I shall review the interaction between our evolving, if not always improving, understanding of financial crises, and the collection of data that allow us better to prepare for the next crisis.

  • I shall argue that each crisis was conditioned by a collective misapprehen-sion, or to use the phrase of Robert Shiller, a false popular model, that had the effect of creating a blind spot to risk.
  • I shall further argue that each crisis was followed by improvements in data.
  • I shall further argue that Lamfalussy was correct in what might be called Lamfalussy’s law: “safety does not flow automatically from better information”. In other words, connecting the dots is as important as collecting the dots, meaning the right data.
  • I shall further argue that, nevertheless, the macroprudential approach requires both an ongoing improvement of our analytic framework and thoughtful extension of our data collection.
  • Finally, I shall argue that, since the crisis of 2007–09, central banks have widened their data collection and sharing in ways that recall Alexander Lamfalussy’s proposals of 40 years ago.

I shall begin with the origins of the BIS international banking data in the 1960s before discussing the leadup and the response to the Latin American debt crisis in the early 1980s – a crisis that Lamfalussy himself warned about well ahead of time and also helped to manage. I will then discuss the Asian financial crisis of the late 1990s and the Great Financial Crisis of 2007–09. Before closing, I shall touch on some current analytic and data challenges.

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SUERF Policy Note, Issue No 16SUERF Policy Note, Issue No 16

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