ESSAY:
‘The threat of moral hazard has played aninfluential role in shaping post-crisis policy debates about the optimal roleand limits of financial regulation as a means of constraining sociallyexcessive risk-taking. Simultaneously, however, our understanding of moralhazard – its potential sources, its impact on financial markets andinstitutions, and the most appropriate regulatory responses – is far fromcomplete. Discuss what role financial regulation plays in generating it and,most importantly, what role regulation can play in preventing – or minimizing –its dangerous effects.’