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November/December 2013, 
Vol. 95, No. 6
Posted 2013-12-20

The Credit Crisis and Cycle-Proof Regulation

by Raghuram G. Rajan

The current financial crisis can be blamed on many factors and even some particular players in financial markets and regulatory institutions. But in pinning the disaster on specific agents, we could miss the cause that links them all. The author argues that this common cause is cyclical euphoria; and, unless we recognize this, our regulatory efforts are likely to fall far short of preventing the next crisis.