Matthias Thiemann

How do economists’ ideas regarding financial markets influence financial market regulation? We know little about the causal pathways by which academic discourses influence policy making and how they interact with interests and institutional design. This project seeks to address this knowledge gap. It does so by exploiting the fact that the reorientation towards a new approach to financial regulation post-crisis are still in the making in the European Union, at the national and at the European level.

The regulatory failures in banking regulation, which became evident with the outbreak of the financial crisis, led to a virulent questioning of the then pre-dominant policy paradigm. Since then, a new macroprudential approach to financial regulation has taken hold. This new approach attempts to maintain the financial stability of the financial system as a whole through controlling systemic risks in the "time-dimension" (pro-cyclicality) and the "cross-sectional dimension" (the interdependence and interaction of the institutions).

In the meantime, following the adoption of Basel III through CRD IV, policy makers have been implementing first macro-prudential measures in the Euro-Zone and in the UK. The goal of this research project is to understand how the measures adopted in the Basel III framework as well as in in different legislations relate to the discussion in the academic literature, thus to understand under which conditions academic ideas get translated and transformed into policy tools.

Financial market regulations are based on cognitive models, which compete for their validity within the academic field. At the same time, they imply changes in the jurisdictional claims by regulators and threaten the interests of market actors. In order to do justice to these two aspects, the project approaches the formulation of financial market regulation after the crisis based on an ideational approach to public policy and employs a comparative political economy perspective to investigate the implementation of macroprudential policies in the different national/transnational policy settings. By providing a clear definition of the ideational variables related to systemic risk and macroprudential regulation, a careful study of the implementation process and the direct influence these ideas exert on actors, I seek to directly observe the interaction of cognitive work and the political economy within which it is embedded.