Financial reform may lead to future crises due to under-regulation paradox.
The article discusses how financial regulations can be both too little and too much, leading to financial crises. It shows that when there is little information about the likelihood of a crisis, regulations can drop too low during peaceful times, making a crisis more likely. On the other hand, a crisis can lead to excessive regulations, causing stagnation. The researchers suggest solutions like more transparency, independent regulators, and global standards to prevent these issues.