The dangers of procyclical bias

摘要

When the turbulence erupted last summer, the financial world was divided between optimists (the "summer storm" camp) and pessimists (who saw the elements of complexity in the turmoil from the beginning). But after almost a year, we have to accept that even the gloomiest among us could not foresee the sheer scale and complexity of the turmoil, in terms of the products, markets, institutions and countries affected; in terms of the range of issues raised by the events; and in terms of uncertainties regarding the potential impact on the real economy. One of the most important topics that need urgently to be addressed is the procyclicality of the financial system, and to what extent this is exacerbated by factors such as accounting and capital regulations, the interconnection of products, markets, institutions and countries in a globalised world, and compensation schemes. Opinions on the matter are sharply divided.