Person:
Ize, Alain
Author Name Variants
Fields of Specialization
International finance,
Macroeconomics,
Monetary policy,
Financial sector issues and regulation
Degrees
Departments
Office of the Chief Economist for Latin America and the Caribbean, The World Bank
Externally Hosted Work
Contact Information
Last updated
January 31, 2023
Biography
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).
Publication Search Results
1 - 5 of 5
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Publication
The Conceptual Foundations of Macroprudential Policy : A Roadmap
(World Bank, Washington, DC, 2013-08)This paper explores post-Lehman macroprudential regulation by interacting two types of market failures (principal-agent and collective action) with two cognition modes (unconstrained and constrained) in the context of aggregate risk. Four paradigms with orthogonal policy justifications are identified. In the first time consistency paradigm, regulation offsets the moral hazard implications of efficient but time inconsistent post-crisis bailouts. In the second dynamic alignment paradigm, it protects unsophisticated market participants by maintaining principal-agent incentives continuously aligned in the face of aggregate shocks. In the third collective action paradigm, regulation arises in response to the socially inefficient yet rational financial instability resulting from uninternalized externalities. The fourth collective cognition paradigm is grounded on the need to temper the mood swings that arise from bounded rationality or severe cognitive frictions in a rapidly changing, complex and uncertain world. These four rationales give rise to important tensions and trade-offs in the design of macroprudential policy. -
Publication
The Foundations of Macroprudential Regulation : A Conceptual Roadmap
(World Bank, Washington, DC, 2013-08)This paper examines the conceptual foundations of macroprudential policy by reviewing the literature on financial frictions from a policy perspective that systematically links state interventions to market failures. The method consists in gradually incorporating into the Arrow-Debreu world a variety of frictions and sources of aggregate volatility and combining them along three basic dimensions: purely idiosyncratic vs. aggregate volatility, full vs. bounded rationality, and internalized vs. uninternalized externalities. The analysis thereby obtains eight "domains," four of which include aggregate volatility, hence call for macroprudential policy variants grounded on largely orthogonal rationales. Two of them emerge even assuming that externalities are internalized: one aims at offsetting the public moral hazard implications of (efficient but time inconsistent) post-crisis policy interventions, the other at maintaining principal-agent incentives continuously aligned along the cycle. Allowing for uninternalized externalities justifies two additional types of macroprudential policy, one aimed at aligning private and social interests, the other at tempering mood swings. Choosing a proper regulatory path is complicated by the fact that the relevance of frictions is likely to be state-dependent and that different frictions motivate different (and often conflicting) policies. -
Publication
Dollarization of the Banking System : Good or Bad?
(World Bank, Washington, DC, 2003-08)De Nicol� Honohan, and Ize assess the benefits and risks associated with dollarization of the banking system. The authors provide novel empirical evidence on the determinants of dollarization, its role in promoting financial development, and on whether dollarization is associated with financial instability. They find that: The credibility of macroeconomic policy and the quality of institutions are both key determinants of cross-country variations in dollarization. Dollarization is likely to promote financial deepening only in a high inflation environment. Financial instability is likely higher in dollarized economies. The authors discuss the implications of these findings for financial sector and monetary policies. -
Publication
The Process of Financial Development : A Statistical View from the FSAP Program
(World Bank, Washington, DC, 2008-05)This paper uses a simple statistical approach to exploit some of the wealth of information contained in FSAP reports. The authors classify and count FSAP recommendations along a logical grid that reflects the fabric of financial activity and the ways in which states organize their policies in support of financial development. With some caveats reflecting the inherent limitations of the exercise, this analysis provides a simple monitoring tool to help understand the nature and evolution of the FSAP program. At the same time, it throws light on the nuts and bolts of the process of financial development and its inter-linkages with economic development. While many of the findings conform well to what one would expect, others are more surprising and also potentially more useful for understanding the inner workings of financial development. -
Publication
Financial paradigms
(World Bank, Washington, DC, 2009-11)What market and regulatory issues led to the subprime crisis? How should prudential regulation be fixed? The answers depend on the interpretative lenses or 'paradigms' through which one sees finance. The agency paradigm, which has dominated recent regulatory policy, seems to be influencing much of the emerging reform agenda. But collective welfare failures particularly externalities and collective cognition failures particularly mood swings were at least as important in driving the crisis. All three paradigms should therefore be integrated into a more balanced policy agenda. But doing so will be difficult because they often have inconsistent policy implications.