Haberly and Wojcik 2017 Culprits or Bystanders July 1 Accepted (archive).pdf (1.07 MB)
Culprits or bystanders? Offshore jurisdictions and the global financial crisis
journal contribution
posted on 2023-06-09, 07:40 authored by Daniel HaberlyDaniel Haberly, Dariusz WójcikQuestions have been raised regarding the role of low-tax offshore jurisdictions in the global financial crisis, based largely on evidence that many problematic asset-backed securities were issued from or listed in the Cayman Islands, Jersey, Ireland, and other ‘offshore’ sites. However, there has not been a systematic investigation of the offshore geography of crisis-implicated securitization. Here we fill this gap by constructing the first comprehensive jurisdictional map of the largest pre-crisis Asset-Backed Commercial Paper (ABCP) programs, and examining the rationale for and impacts of this geography in detail. We show that offshore jurisdictions were disproportionately involved in producing the most unstable ABCP classes. However, this is difficult to explain in terms of the traditional role of offshore banking centers as sites for direct avoidance of onshore regulation and transparency. Rather, we propose a Minskian model of pre-crisis offshore ABCP production, wherein these jurisdictions specialized in alleviating incidental institutional frictions (e.g. double taxation) hindering onshore financial innovation. In this context, they could sometimes be legitimately described as improving the institutional ‘efficiency’ of financial markets; however, by facilitating the endogenous evolutionary instability of these markets, this apparently innocuous service had profoundly negative effects. This normative disconnect poses a conundrum for offshore reform.
History
Publication status
- Published
File Version
- Accepted version
Journal
Journal of Financial RegulationISSN
2053-4833Publisher
Oxford University PressExternal DOI
Issue
2Volume
3Page range
233-261Department affiliated with
- Geography Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2017-08-22First Open Access (FOA) Date
2019-07-31First Compliant Deposit (FCD) Date
2017-08-21Usage metrics
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