Following the great financial crisis of 2008, a large number of countries adopted regulatory measures intended to reduce the risks of a new crisis. From the start of the pandemic, some of these measures were relaxed (temporarily, in principle) to alleviate the looming economic crisis. A recent study by IMF researchers took a close look at how financial markets reacted to this wave of deregulation in around 20 countries. The results are surprising.
The great financial crisis had shown to what extent the banks had taken financial risks. Moreover, when the banking system threatened to collapse, the authorities had to pour out gigantic sums to stop a tumble that threatened to plunge the world into a veritable economic depression. After the fact, the lessons have been learned: regulations have been tightened everywhere, largely in response to international agreements.