The International Financial Stability (IFS) Programme - jointly sponsored by the Centre for Economic Performance and the Financial Markets Group - examines issues associated with financial crises, both international and domestic. The work programme is broad, spanning from microeconomic issues such as the causes of financial crises, risk in financial markets, and the structure of financial market regulation to macroeconomic issues such as exchange rate management, monetary policy, and institutional structure or "architecture." These questions are examined at a conceptual, theoretical level and also at a more practical, policy-relevant level.

Work in the programme seeks answers to the following sorts of questions:

• What are the causes of financial crises? Do they result from moral hazard engendered by official guarantees, or are they an inefficient economic outcome reflecting a coordination failure?

• What role does the banking system play in propagating financial crises? How can the regulation of domestic and internationally-active banks be improved to reduce crises and to cushion their impact?

• How are financial crises propagated? How and why are they contagious? Can greater provision of information - through public disclosures or more precise private information - affect the transmission of crises? Is it possible to predict financial crises? What are the important early warning indicators?

• Can the design of debt contracts affect the incidence of crises and their resolution? For instance, are there any market mechanisms (such as collective action clauses) that could be introduced to mitigate such crises? How can the ex ante commitment value of non-negotiable debt be compared to the ex post welfare gain that arises from the flexibility to renegotiate?

• What is the best exchange rate policy for a country to adopt? When should a country opt for a hard peg exchange rate? What are the advantages and disadvantages of particular hard peg regimes - currency board or official currency substitution (generally known as dollarization)? When should a country join a monetary union (such as the euro area)?

• What is the role of the international financial institutions, particularly the IMF? Should there be an international Lender of Last Resort? What is the role for international standards and codes, and how can they be monitored and enforced?

• What are the political economy issues that arise in the reform of the international financial architecture? Should smaller, emerging economies be given more influence? What are the implications for voting and control of the international financial institutions? More generally, how can the interests of the smaller countries be balanced against concerns about U.S. domination of decision-making?

See our list of recent publications and working papers