States, Banks and the Financing of the Economy
to be held in Zürich, Switzerland
5-6 September 2012

Call for Papers

Notes on the theme of the Colloquium: Bankrupt states, (f)ailing banks, angry citizens – a toxic cocktail threatens the European and the world economy. The current global financial, economic and fiscal crisis reveals a complex interplay between states and financial markets: Instability in banking has spread to states and vice versa, with failures in both sectors looming. Economic and political fragility are feeding each other. The crisis increasingly hurts the real economy. This in turn further worsens public finances and bank balance sheets. How can such a vicious circle be interrupted?

1) The role of monetary and fiscal policies: Have monetary and fiscal policy reached their limits? What should be the division of labour between governments and central banks in financial and fiscal crisis resolution? How could the EU’s crisis mechanisms achieve credibility in the short run while avoiding moral hazard in the long run? What is the government bond ownership distribution and what implications does it have for crisis resolution? How does rising tax pressure on wealth, capital, banking and financial transactions affect savings behaviour, capital flows, corporate financing structure, financial market efficiency, price volatility, and banks’ business?

2) The role of markets and financial institutions: When is leverage beneficial, when is it a problem? How can firms finance investment when banks and governments are deleveraging? What is the impact of the tax treatment of interest, dividend and capital gains on corporate and bank capital structure? How do pervasive uncertainty, flight to quality, panic sales, and extreme stock market fluctuations affect banks, investors, and financing conditions for large and small firms? How do exchange rate fluctuations affect macroeconomic conditions? Is there a case for a return of capital controls?

3) The role of regulation and of resolution rules: Is orderly resolution of insolvent states and banks the way to go? How to do it? How to distinguish between illiquidity and insolvency in the face of confidence crises and multiple equilibria? How do credible bail outs have to be designed to stop contagion? Who should, and is able to, bear the cost? What is the role of collateral in safeguarding financial discipline and stability? When, and how, should banks be nationalized? What is the optimal future division of labour and risk between banks and the state? Will the new regulatory framework and macroprudential surveillance manage to prevent procyclicality of regulation in the future?

Researchers from financial institutions, universities, central banks and international institutions are invited to submit papers on the above and related topics to be discussed in three parallel Commissions. Papers should have clear practical or policy implications and preferably be non-technical. The SUERF Marjolin Prize (EUR 2,000) will be awarded for the best contribution of the Colloquium and is restricted to (co-)authors aged under 40 on 5 September 2012.

A non-exhaustive list of research questions and useful references are available from the Colloquium website at http://www.suerf.org/c30. Authors should submit 2-3 page abstracts or a full paper online through the SUERF Colloquium website by 15 February 2012. Notification of acceptance or non-acceptance will be provided before 31 March 2012. The final draft version of the accepted paper must be received by 31 July 2012. Papers already published prior to the Colloquium are not eligible. Enquiries should be addressed to michael.bailey@oenb.at.