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Global lending conditions and international coordination of financial regulation policies

Global lending conditions and international coordination of financial regulation policies | Speevr

by Enisse KharroubiUsing a model of strategic interactions between two countries, I investigate the gains to international coordination of financial regulation policies, and how these gains depend on global lending conditions. When global lending conditions are determined non-cooperatively, I show that coordinating regulatory policies leads to a Pareto improvement relative to the case of no cooperation. In the non-cooperative equilibrium, one region – the core – determines global lending conditions, leaving the other region – the periphery – in a sub-optimal situation.