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International Monetary Fund

1. At the Executive Board discussion of quota and voice reform in July, which built upon two earlier informal seminars, Directors highlighted the need to make significant further progress in the coming months.2 This would enable the Executive Board to report concrete and substantial progress to the Board of Governors at the Annual Meetings. It was envisaged that the period leading up to the Annual Meetings would be used to begin to resolve the remaining areas of difference and focus on the main choices that need to be made. In that vein, staff and management were to consider how the views expressed and guidance provided by Directors so far could be built upon to identify more concretely the scope for specific proposals.

Jihad Dagher
Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.