Ize, Alain

Office of the Chief Economist for Latin America and the Caribbean, The World Bank
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International finance, Macroeconomics, Monetary policy, Financial sector issues and regulation
Office of the Chief Economist for Latin America and the Caribbean, The World Bank
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Last updated January 31, 2023
Alain Ize is a senior consultant to the Chief Economist Unit of the Latin America and the Caribbean Region of the World Bank. His research and publications cover issues of international finance and open macroeconomics (including exchange rate, monetary policy and financial dollarization issues), central banking and development banking, financial sector development and regulation, and fiscal policy. Prior to working for the World Bank, he was an Area Chief in the Financial Systems Department of the IMF. He worked previously for the Fiscal Affairs Departments of the IMF (as a senior economist), El Colegio de Mexico (as a professor and Chair of the Economics Department) and Banco de Mexico (as a researcher). He visited the University of California at Davis (1983-84) and Stanford University (1984).
Citations 23 Scopus

Publication Search Results

Now showing 1 - 3 of 3
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    Risk Absorption by the State : When Is It Good Public Policy?
    ( 2011-12-01) Anginer, Deniz ; de la Torre, Augusto ; Ize, Alain
    The global financial crisis brought public guarantees to the forefront of the policy debate. Based on a review of the theoretical foundations of public guarantees, this paper concludes that the commonly used justifications for public guarantees based solely on agency frictions (such as adverse selection or lack of collateral) and/or un-internalized externalities are flawed. When risk is idiosyncratic, it is highly unlikely that a case for guarantees can be made without risk aversion. When risk aversion is explicitly added to the picture, public guarantees may be justified by the state's natural advantage in dealing with collective action failures (providing public goods). The state can spread risk more finely across space and time because it can coordinate and pool atomistic agents that would otherwise not organize themselves to solve monitoring or commitment problems. Public guarantees may be transitory, until financial systems mature, or permanent, when risk is fat-tailed. In the case of aggregate (non-diversifiable) risk, permanent public guarantees may also be justified, but in this case the state adds value not by spreading risk but by coordinating agents. In addition to greater transparency in justifying public guarantees, the analysis calls for exploiting the natural complementarities between the state and the markets in bearing risk.
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    Financial Development : Structure and Dynamics
    ( 2011-10-01) de la Torre, Augusto ; Feyen, Erik ; Ize, Alain
    This paper analyzes the bright and dark sides of the financial development process through the lenses of the four fundamental frictions to which agents are exposed -- information asymmetry, enforcement, collective action, and collective cognition. Financial development is shaped by the efforts of market participants to grind down or circumvent these frictions, a process further spurred by financial innovation and scale and network effects. The analysis leads to broad predictions regarding the sequencing and convexity of the dynamic paths for a battery of financial development indicators. The method used also yields a robust way to benchmark the financial development paths followed by individual countries or regions. The paper explores the reasons for path deviations and gaps relative to the benchmark. Demand-related effects (past output growth), financial crashes, and supply-related effects (the quality of the enabling environment) all play an important role. Informational frictions are easier to overcome than contractual frictions, not least because of the transferability of financial innovation across borders.
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    Containing Systemic Risk : Paradigm-Based Perspectives on Regulatory Reform
    ( 2011-01-01) de la Torre, Augusto ; Ize, Alain
    Financial crises can happen for a variety of reasons: (a) nobody really understands what is going on (the collective cognition paradigm); (b) some understand better than others and take advantage of their knowledge (the asymmetric information paradigm); (c) everybody understands, but crises are a natural part of the financial landscape (the costly enforcement paradigm); or (d) everybody understands, yet no one acts because private and social interests do not coincide (the collective action paradigm). The four paradigms have different and often conflicting prudential policy implications. This paper proposes and discusses three sets of reforms that would give due weight to the insights from the collective action and collective cognition paradigms by redrawing the regulatory perimeter to internalize systemic risk without promoting dynamic regulatory arbitrage; introducing a truly systemic liquidity regulation that moves away from a purely idiosyncratic focus on maturity mismatches; and building up the supervisory function while avoiding the pitfalls of expanded official oversight.